Rise In Streaming Video Exclusives Could Annoy Consumers, Driving Them Back To Piracy

[Len]

By and large, the added competition being levied upon the traditionally apathetic pay TV industry has been a good thing. Though it has taken a decade longer than it probably would have in a healthier market, the rise of streaming competitors has forced incumbent cable companies like Comcast to up their game and at least consider lowering prices, improving abysmal customer service, and offering more flexible video options.

Granted many pay TV execs seem intent on doubling down on the dumb ideas that cause cord cutting in the first place, but it's indisputable that we're finally seeing some evolution in the traditionally stubborn sector. Pay TV sector executives that believe cord cutting is a fad that magically ends once Millennials procreate are increasingly being marginalized, as are executives that believe they can milk the dying traditional TV cash cow indefinitely without repercussions.

That's not to say that the new streaming frontier isn't going to be without some pretty notable problems. Studies suggest that by 2022, nearly every broadcaster, cable channel, and their mother intend to offer a direct to consumer streaming video product. That includes Disney, which later this year will be pulling most of its most popular content from services like Netflix and Hulu (Star Wars, Marvel films, Pixar titles) and exclusively hosting them on its own, new streaming video platform.

On its surface this improved level of competition is most assuredly a good thing. But as we've noted previously there's a problem brewing here that most executives and analysts don't seem particularly keyed into. Namely, that once you've cordoned off each broadcaster and content-creator's product into countless walled silos -- each requiring their own subscription -- you've not only countered the biggest benefit of the streaming revolution (lower prices, greater flexibility), you've opened the door to customers getting frustrated and returning to piracy.

It's pretty rare that I see research firms point out this potential pitfall. For example, The Diffusion Group's study noted that while they predict every broadcaster will offer their own streaming service by 2022, this could simply increase the number of annoying retrans and carriage feuds (and the annoying blackouts and price hikes that result) between cable companies and broadcasters:

"These are early signs of an emerging media tribalism," argues Berkley. "Major networks will increasingly reserve their best titles for their own direct-to-consumer services, which will help drive total network DTC subscriptions close to 50 million by 2022."

Berkley warns, however, that DTC strategies come with great risk, especially for TV networks. "The legacy model is built upon decades of comfortable relationships between networks and operators. If networks extract too much high-value content too quickly, channel conflicts are inevitable."

Said "conflicts" could prove particularly interesting now that we're doing away with net neutrality (for, you know, "freedom" or whatever). We've already watched as companies like Viacom blocked entire broadband IP ranges from accessing content during programming disputes with cable operators. News Corp also blocked Cablevision customers during a similar feud. These bad ideas are a two-way street, and without net neutrality protections in place, there's a universe of new, creative ways cable operators and broadcasters can hamstring one another in direct competition, annoying consumers.

Less talked about by analysts is the fact that customers might find piracy a better, simpler alternative if they're forced to subscribe to thirty different services (at $8 to $20 per month, per pop) just to access the movies and TV shows they're looking for. Like CBS did with the new Star Trek: Discovery series, each player in this game wants to hide their best content behind an exclusivity paywall. But customers are already confused and frustrated by constantly shifting licensing deals impacting title availability, and may find piracy to be the simpler alternative to having to navigate an ocean of exclusivity silos.

Again, the rise of streaming competition and lower-priced, more flexible TV services is a good thing. But if many of these companies aren't careful, it wouldn't take much to shoot this progress squarely in the foot via exclusives or other anti-competitive behaviors emboldened in the wake of federal apathy on net neutrality. The end result could be progress in name only, with customers finally shaking off one bad idea (bloated, expensive bundles of over-priced channels), only to find themselves forced to subscribe to a dozen caveat-laden streaming services just to get the content they're looking for.