The Paid Video Renaissance Is Maturing
We are entering the next stage in which efficiency will be the word.
We still find ourselves in a paid video streaming renaissance. A significant amount of high-quality scripted content is available at our fingertips without the need for complicated contracts and subscriptions. However, it increasingly doesn’t feel like we are still in the golden age of streaming. The parade of sizeable price increases, combined with streamers leaning on tried-and-tested practices from the big cable bundle era, have removed some of the magic from the equation. Instead of this change boding poorly for the video streaming industry, it is more likely a sign of the video renaissance maturing. We are entering the next stage in which efficiency will be the word.
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Higher Video Streaming Pricing Is a Good Thing
In what has become something of a quarterly tradition, people are once again sounding the alarm about video streamers raising subscription prices. Disney was the latest company to announce higher prices with Disney+ (with no ads) seeing a 27% price increase and Hulu (with no ads) seeing a 20% increase. Despite drawing anger and frustration, continued price increases end up being one of the better developments for an industry that has been dealing with its fair share of issues and challenges.
A common refrain that has accompanied video streaming price increases is that the cost of streaming is getting close to what the big cable bundle costs. This is then said to indicate failure on the part of streamers to push the video industry forward. A major issue with this line of thinking is that it ignores why the cable bundle was problematic.
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The Year of Paid Video Streaming Price Hikes
Paid video streaming has provided analysts and pundits plenty to talk about in 2022. Competition has intensified as Disney goes after Netflix for the subscriber crown (Disney has already won). Wall Street also turned sour on most streamers, driven by the higher competition and concerns with business model sustainability.
Set within this change and chaos, there is one theme that ended up being quite reliable: subscription price hikes.
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Roku’s Bad Bet
In just the past few months, a lot has taken place in the paid video streaming market. Netflix, prematurely crowned by consensus as the streaming winner, is now having something akin to an identity crisis while being surpassed by a more capable competitor in Disney. Consumers have plenty of choice in the market and are beginning to show signs of hitting some kind of subscription stacking plateau. Increased churn is likely not far behind.
Set within this highly evolving and volatile market, Roku is a company stuck in the middle.
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Tribalism in Content Distribution Will Intensify
For the first time, Spotify may be discovering the limits of all press is good press. Some look at the current Spotify vs. Neil Young vs. Joe Rogan saga as a battle involving freedom of speech. Others think it’s more of a censorship dilemma. With Spotify choosing to platform Rogan despite Young’s ultimatum, a move that everyone saw coming, the company finds itself taking on a new kind of pushback - one around company ethics, morals, or the lack of. Spotify and Rogan responded to the latest controversy with Spotify saying it was OK with Rogan’s content and Rogan pledging to have more diverse guests – a notable admission from Rogan.
Netflix went through a smaller episode last year when backlash erupted over comments made by Dave Chapelle on one of his comedy specials that aired on Netflix.
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A Digital Content Overload
One topic that has fascinated me for the past 18 months has been societal changes arising from the pandemic. Most of the so called movements or shifts are showing signs of petering out. The Peloton movement, which pushed an anti-gym ideology, does not appear to be gaining much momentum. Meanwhile, the Work From Home movement, which took over tech-oriented blogs and news sites for the better part of the past year, is showing signs of losing steam as more people get back into the swing of things.
A somewhat recent development that may end up having more legs in terms of longer-term trends caused by the pandemic is changing digital content consumption trends.
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Streaming Video’s Ongoing Revolution
There continues to be something that I call the “iPhone mentality” in tech. A singular product or service is positioned as quickly transforming a market or industry. A byproduct of this thinking is the tendency for consensus to prematurely declare that first movers are winners.
Netflix was declared the winner in paid video streaming back in 2018.
Spotify was declared the winner in music streaming in 2015.
Tesla was declared the winner in electric vehicles in 2017.
In each example, a winner was declared before we even knew what it meant to win in that respective industry.
New data out from Nielsen suggests that streaming video remains in a different place than what consensus assumes.
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Movie Theater Nostalgia
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Humans love going to places. The idea that we will one day wear a pair of VR googles in the home in lieu of actually going on vacations, visiting family and friends, or just simply going out to social gatherings is a fantasy.
Although humans like going to places, the list of failed social gathering ideas is long and storied. Dance halls, arcades, pool halls, and roller skating rinks once defined culture. Today, these venues are nothing more than relics with a few owners trying to keep the memories alive for the select few willing to pay for the nostalgia.
The list of social gathering places that have lost out to time and technology will only get longer. We see the latest addition before our eyes: movie theaters. Some think movie theaters will be fine postpandemic. Others are convinced movie theaters will go the way of the dodo bird. Reality is found somewhere in the middle. There will be physical movie theaters in the future, but they will look like a shell of their former selves. Movie theaters will become the new arcades - still around if you search hard, but irrelevant.
Most movie theater screens will either meet the wrecking ball, contractor’s hammer and saw (for conversion into something else), or they will be bought by families that feel a calling or duty to keep the nostalgia alive.
Movie theaters aren’t in decline because video streamers are seeing success in grabbing eyeballs. Netflix, Amazon, or Apple are financially able to purchase a movie theater chain tomorrow and give away free tickets to subscribers to watch exclusive films. This may seem like a great idea to some. However, a growing portion of the population would feel differently. Movie theaters face a very difficult future because society is moving on from the idea of traveling outside the home to sit in a dark room to consume video content. It’s telling how everything from reclining chairs to steak and lobster have been used as carrots to get people inside a movie theater. The problem with movie theaters isn’t a suboptimal food selection or uncomfortable seating. Instead, fewer people want to venture out the home, sit in a dark room, and spend two hours watching a movie that began at a time not of their choosing.
As for what is driving this trend:
The rise of on-demand consumption. The thought of needing to pick out a specific time to go somewhere to watch video content will seem as foreign as needing to leave the house to play a video game. It simply isn’t going to register to people.
New-age communication. Turning the smartphone and wearables off for two hours is becoming unconscionable for a growing number of people.
It certainly doesn’t help that the rise of streaming is causing some blockbuster movies to be watched in the home at the same time that they are being watched inside theaters. However, blaming that development for the demise of movie theaters is misplaced. It does little but leave an opening for nostalgia holders to think “if only tech companies would support movie theater operators.”
Unfortunately, these developments aren’t confined to movies. A similar trend is slowly occurring with theaters in general. Don’t let Broadway’s commercialization overshadow what are deteriorating economics found with operas, plays, and other performance art that take place in (large) dark rooms at a time not of our choosing. It’s telling how such activities increasingly need to be supported by cities and states. The logic is that such institutions are part of culture. The real purpose of such funding is to keep the nostalgia flowing.
Movies aren’t going anywhere. Theater isn’t going anywhere. Instead, the way we consume these art forms will change. Selling tools for retrofitting basements into “video consumption” rooms contains more upside than owning a chain of movie theaters.
Nostalgia is a powerful drug. While it is possible to sell nostalgia, one who does is ultimately stuck selling old ideas into a society that is always forward looking.
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