More and Better Video Bundles for Consumers

There are now are many popular streaming sites competing to attract subscribers for video content bundles and there are more coming. Vimeo, CBS all access, DirecTV, Google’s YouTube TV, HBO now, HULU, Netflix, Sling, Apple TV, Amazon Prime and Vue are all open for business. Viable competitors undermine the justification for regulations that were based on one or two providers in each community.

Streaming service flows atop network and content investments made by other industries. Internet bandwidth constructed by wireline and wireless Internet Service Providers (ISPs) make streaming transmissions possible. Hollywood’s ongoing investments in TV programming provide both the cable TV bundles and streaming bundles that attract consumers.

On the other hand, original programming by streaming sites creates the appeal to attract new subscribers. The tantalizing prospect of “cutting the cord” and saving a little money without losing access to our favorite TV programs fueled the evolution of streaming sites. Netflix’s US subscribership grew to 51 million households compared with the 49 million subscribers for the top six US cable service households.

The streaming choices for consumers are expected to expand although bundles are unlikely to have identical content. Bundle content is not yet regulated as it is for the cable TV bundles where local channels have “must carry” status. Local cable franchise regulators can require cable TV operators to set aside public access, educational and government affairs channels, along with funds to develop their studios. Streaming sites face no such regulations.

Streaming sites negotiate their own deals with content owners. Sometimes they need to wait the expiry of prior contracts between cable operators and Hollywood producers. Disney announced that it would launch at least 2 new streaming sites by 2019. On one it will place its ESPN related channels and on another it will place its entertainment fare. With new avenues and advert revenues available, Disney is likely to withdraw from a brief stay at Netflix where it had placed entertainment titles.

Not long ago, streaming sites suffered from an absence of live TV programs, a lack of major networks (ABC, NBC, Fox and CBS), a void in sports programming (including the ESPN channels, and regional sports channels), and a scarcity of live news and commentary coverage.

Most of the new streaming sites offer some content from the major TV networks and PBS, although inclusion of major network content can be limited. CBS seems reluctant to be treated like other major networks and often makes itself unavailable on the streaming lineup. The HULU bundle is an exception. Streaming services without a news lineup, can always suggest that consumers subscribe to “CBS all access” service for $6 per month.

Streaming versions of TV program content and streaming-originated shows are typically available in three formats – live (first day the program is aired), on demand and as a program saved in the consumer’s DVR. Consumers can sometimes use their DVR to skip over advertising embedded in the saved show or they can pay a small amount (e.g. $4 per month) to skip advertising in all the holdings of the streaming operator.

How consumers size up the merits of the new content bundles depends on what they expect. The content coverage of the best streaming sites is about equal to their cable competitors. But streaming sites have a few advantages over cable TV bundles. Some of streamers’ original programming rates as “must have” (e.g., “House of Cards” or “Orange is the New Black”) with an allure as strong as HBO or Showtime.

Dedicated sports fans cannot live without ESPN and regional sports channels. “PlayStation Vue tried to introduce a “skinny” television package without ESPN in March 2015 and drew little consumer interest.” It will be interesting to watch ESPN’s own streaming site compete against subsets of ESPN coverage carried within cable TV and streaming bundles. Disney’s move is intended to protect the ESPN cable bundle, at least initially. But when ESPN comes unglued from the cable bundles, those bundles will lose subscribers.

Consumers are well served by the new sources for their favorite TV shows and the original programming from streamers. As they migrate off cable TV delivery of video bundles, they will begin riding ISP networks, and that will draw investment for more broadband capacity. Large streaming service sites already direct most of their streaming traffic away from public ISPs and onto private content delivery networks (CDNs), and some of the streaming services even operate their own CDNs.

In a CDN, content exists as multiple copies on strategically dispersed servers. A large CDN architecture can have thousands of servers around the globe, helping send the same content to multiple clients even when bandwidth is limited or when there are spikes in demand. More than half of the total streaming traffic, is carried on CDNs, not on the public internet — the ISP industry no longer dominates.

Amazon and Google use their own CDN and offer to lease their CDN capacity to other streaming sites. Amazon Cloud Front network and Google Cloud CDN appear to be very successful. Netflix operates its own CDN called Open Connect. Streaming sites can use their CDNs to control the speed of transmission by program or by customer. They can assign different priorities to their customer’s program requests. ISPs are forbidden by “net neutrality” from offering that kind of traffic control.

Because streaming services continually change their content bundles and prices, it can be difficult to determine which bundle best fits a consumer’s needs. There are a few websites that offer help. Untangle.tv, Suppose, Justwatch, Yidio, and the Washington Post Streaming Guide are streaming site selection tools that may be helpful, although none does a perfect assessment.

As streaming bundles evolve in content, pricing and their use of CDNs, consumers will see additional well-rounded competitors to cable TV service. If the regulatory shackles on cable TV and ISPs are loosened, the competitive video bundles market will blossom even faster.

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