Studios Online Efforts May Trigger Backlash

(Satellite Business News) — The consumer media went bananas last week when Disney announced it would withdraw its movies and other shows from the Netflix service because the studio plans to launch its own online service next year.

Without a doubt, Netflix is an enormously popular service. But since when did it become as important as the consumer media portrayed it? The core reality of the online video business is the adage, “they come, they go.”

That applies to customers, content providers, and everything else. The online video business likes to promote the flexibility it offers consumers. Why would that not apply to suppliers? The only concrete element of that business is the lack of concrete.

Moreover, all the hoopla last week seemed to ignore a far more critical reality, one which has been discussed in this space several times: There are just too many of these on-line video services, and way too many more are on the drawing boards.

However, the on-line video frenzy may not be close to ending. Any studio or programmer that does not yet have their own on-line service faces increasing criticism and potential backlash from shareholders.

These are, after all, “copycat” industries. How all of them believe they can be profitable in the long-run is puzzling at best.

Some may wonder why anyone should care which companies make money or not by throwing money after an on-line video service. Other than shareholders, no one should—at least about the financial aspects.

But there is a much broader aspect to this, one that might have a far deeper impact beyond how many of these services generate income.

The more of these services pop up, the more studios or programmers believe they have to have their own on-line video offering, the more live services launch, the larger the chances consumers are going to become utterly frustrated by the whole thing.

To be clear, anyone who thinks the on-line business attracts subscribers mostly on the ability to watch TV on phones, tablets, and consumers is totally missing the posting. It is 90 percent about price and the belief these services are less expensive than traditional satellite TV and cable services because consumers can buy fewer channels. But, as also noted here many times, once the cost of the data — even with all the data deals out there — are factored in, on-line services are really not that great a deal for many consumers. Netflix is not a substitute for satellite TV and cable. It is an add-on.

But as everyone, literally everyone, and their grandmothers start their own online video services, the market will not only become fractionalized, but subscribers will be forced to buy this and that service to watch the programming they used to get from another place. Netflix subs who have kids are going to have to buy the new Disney online service. And there will be tons of similar examples.

Take the CBS standalone online service. This fall, after many delays, it will premier a new Star Trek series, after first showing a couple of episodes on the CBS broadcast network.

There are millions of Star Trek fans in the nation. The vast majority of them already pay for CBS through a traditional video service and the retrans fees CBS charges those distributors. When these Star Trek fanatics realize CBS is going to require them to pay six bucks a month (or 10 bucks without commercials) for the standalone online service when they may only be interested in watching the 10 or so new Star Trek episodes produced each year, are they going to be thrilled?

Will CBS run the episodes back to back each week so consumers can pay for only a few months, or will it stretch it out? Shrewd marketing is one thing. Engendering consumer animosity is another. If CBS runs two original shows of the new series each month, will consumers be overjoyed essentially spending $3 for each episode on top of what they already pay for CBS?

As more and more networks, programmers, and studios attempt to entice subscribers to their online services, the Disney and CBS examples will multiply exponentially.

Then take into account all the live, on-services, like Sling TV, Hulu and Google’s. How many consumers will want to pay for those, as well Netflix, Disney, CBS, etc., etc., before they figure out they are spending far more money each month than they once did for traditional TV services — which included more channels?

Yes, watching TV on a smartphone, tablet, or computer is very cool — particularly when someone is outside the house. But common sense suggests the industry has produced this TV show before and often not with good ratings.

Bob Scherman is the editor and publisher of Satellite Business News, an independent trade publication. Scherman has covered the satellite TV, cable, and related businesses for almost 35 years. Comments on this column can be sent to [email protected].