Do you want to enjoy a real time major league baseball game? Maybe you should tune into Facebook? Would you prefer live NFL games? You might catch those on Amazon?
Some of the most attractive weekend and prime TV programming appears to be moving elsewhere. Facebook and Amazon have bought rights to stream live professional sports starting very soon. CBSN already offers live streaming news. Live coverage of major league sports and news had once been a compelling reason for subscribing to a cable TV bundle. But competition from news and sports streaming sources is weakening cable TV’s competitive edge. In the near term, Facebook will not load the sports programs with advertising, but it surely will not leave all the advertising money to its TV rivals.
Some owners in the traditional cable TV production and delivery chain have diversified into adjacent offerings, such as streaming (offered by ABC, NBCU, HBO and CBS), deeper involvement in program production (e.g. CNBC) and internet access. There are also content producing upstarts. Amazon, the e-commerce behemoth, produces original movies and entertainment and distributes them through its Amazon Prime Video streaming service. For many years, Google has been producing new video through its YouTube venue, and Netflix, the largest streaming company, produces original series and movies for distribution through its streaming service. These are powerful new entrants who are revamping where and when we can see entertainment, news, and sports.
On the verge of content production and distribution are newer players such as AT&T and Verizon, who need ways to broaden their appeal beyond mobile and regulator-hobbled broadband. The competitive choices and innovations delivered to consumers are still evolving and subject to convulsions of regulatory whim.
At the recent “upfront week,” traditional TV networks said that Facebook and Google “have real problems” but those problems pale compared to TV’s real problem — its audience is melting away year by year. The rivalry is clearly about advertising revenues. The streaming upstarts want a substantial part of the $72 billion that advertisers will spend on TV during 2017. Traditional TV channels will be able to attract a diminishing share of advert revenue since advertisers face many more distribution options in which they can place their messages. Unlike in traditional TV channels, digital distribution venues give advertisers the option to close the deal, i.e. complete the sale transaction for the merchandise or service.
When faced with the entertainment choices of streaming service providers and traditional cable TV, consumers may buy both, but many will generally economize with a “skinny bundle” that sidelines channels they dislike or which seem duplicative of streaming libraries. The pressure to concoct a skinny bundle creates friction, mostly with cable channels that are not available over the air and that are less popular with consumers (for example, the Jewelry Channel, EWTN or DIY). The “must carry” obligation forced cable operators to carry local channels regardless of how unpopular or duplicative they may be. The need to set a low price for the skinny channel creates friction with high cost channels such as ESPN. Premium movie channels such as HBO and Showtime carried by cable are also available on streaming providers. This allows premium movie channels to retain more of the retail subscription for themselves, putting further revenue pressure on the cable operator.
The changing mix of video channel bundles, Internet application expansion into traditional TV programs, streaming content variety, and distribution channels works well for the consumer. The evolution of entertainment options would work even better for consumers with fewer regulations that favor one business type over another.