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Pricing Most Powerful Weapon In Streaming Wars, Survey Says

This article is more than 4 years old.

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In today's video streaming wars amongst giants Netflix and Amazon Prime Video - and soon Disney+, Apple TV+, HBO Max and NBCUniversal's Peacock - content is king, right? Not just high-priced exclusive originals, but also classic TV content. That's why Peacock recently stole Netflix's Friends, which has been one of Netflix's most popular shows, in a development that is generally viewed by "the industry" as being a big loss for the reigning champ. That's why HBO Max reportedly spent $1 billion to exclusively feature The Big Bang Theory. And that's why Netflix fired back by paying up big ($500 million) to take down Seinfeld. Those have been the headline stories in entertainment circles over the past month (I have written about these content wars several times in Forbes in the past few weeks). But guess what? Consumers choose money over their Friends by a long shot - a ratio of over 4 to 1, in fact - according to a recent survey of 1,001 U.S. streaming subscribers in PC Magazine.

Yes, for subscription streamers, PC Magazine concludes that cold hard cash still rules the day. Its survey says that a whopping 65% indicated they would cancel their existing subscription video on demand (SVOD) service over price increases, while only 14% say they will bolt if their SVOD loses their favorite content. Meanwhile, only 9% of those surveyed indicated they would leave if their SVOD lacked exclusive original content (content that, like Game of Thrones and The Crown, costs up to $15-$20 million per episode). PC Magazine's survey also found that $33 monthly is the magic number that most streamers are willing to pay for all of their SVOD needs (a number consistent with the $35 monthly sum I recently calculated in my own SVOD math for Forbes).

If PC Magazine's survey numbers are correct (and I'll point out several issues with them below), that reality doesn't bode well for all the new SVODs coming online very soon - Disney+ and Apple TV+ in November, and HBO Max and Peacock in the first half of next year. How will these newcomers break through and effectively reach into our already-stretched pocketbooks? Certainly Disney+ and Apple TV+ are banking on pricing being a key driver of adoption. Disney aggressively prices its upcoming SVOD at $6.99 per month (and $12.99 total for a bundle that includes Disney+, Hulu and ESPN+, a number shockingly - not - the same price as Netflix's most popular monthly plan). Meanwhile, Apple TV+ dropped its opening salvo even lower at a monthly $4.99 price tag (and absolutely free for those who buy new Apple phones and Macs).

We don't yet know HBO Max and Peacock pricing, but you can be sure that executives in those suites are now scrambling to come up with pricing that is both competitive and sustainable. After all, operating at a loss is not an attractive business proposition. This SVOD pricing reality represents a real problem, in particular, for Netflix which - unlike most of the other behemoths mentioned here - drives only one revenue stream (subscriptions). Amidst such price sensitivity and heated competition, Netflix no longer may be able to count on pricing to overcome its massive and ever escalating content expenditures (I recently addressed Netflix's unique business model challenges in this earlier Forbes article). Finally, PC Magazine reports another disturbing number from its survey - i.e., 75% of current subscription streamers don't plan to subscribe to any new SVOD period. Disney+ fared the best here, with 14% of the 1,001 respondents planning to subscribe (while only 5% indicated a willingness to sign up and pay for each of Apple TV+ and HBO Max).

All of PC Magazine's points from its survey are well-taken, of course. At the same time, I wouldn't be too quick to accept them as representing reality for the entire market of potential U.S. SVOD customers (let alone the global market). First, PC Magazine only polled 1,001 existing paid streaming customers, and we don't know who these people are (and whether this is a true representative sample). Second, PC Magazine conducted its survey via Google Surveys from August 9 to August 17, 2019, a methodology which may not be the most accurate and scientific and taken at a time well before many of these streaming services announced major pricing and content moves. Finally, on its content questions, PC Magazine asked consumers how they would be impacted by the loss of their favorite shows. But, from what I can see, the publication didn't ask respondents about the impact on their decisions based on each SVOD's content as a whole. Certainly we sign up and are willing to pay only if we believe that our streaming service will deliver the goods in a macro sense. And that still means content uber alles.

PC Magazine's results certainly are interesting and, perhaps, even instructive. They may offer directional guidance and remind us all about the importance of pricing in our entertainment decision-making. But in this grand media experiment that we call the new "streaming wars," we are still relatively early. It is still experimentation time, and we consumers are the subjects. We ultimately decide each SVOD's fate based on a variety of factors, the precise mix of which remains unknown.

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