First, a caveat: Traditional cable TV is alive and well. Over half of US households have a bundled cable TV subscription in some form; the country’s largest cable company, Comcast, is worth just south of $160 billion. Yet, a growing number of customers are ditching traditional cable in favor of on-demand streaming content providers like Netflix, Hulu, and Amazon Instant Video, and the battle for those customers is getting intense.
Most recently, a blockbuster alliance added fuel to the argument that the future of TV may not lie with traditional cable. In April, Amazon reached an agreement with HBO making a wide selection of HBO content available to Amazon Prime customers, starting May 21. The multi-year deal, worth an estimated $300 million, marks the first time vaunted HBO shows like “The Wire” and “The Sopranos” will be available to those without a traditional cable subscription.
“Amazon has built a wonderful service – we are excited to have our programming made available to their vast customer base and believe the exposure will create new HBO subscribers,” said Charles Schreger, president of programming sales for HBO, in a press release.
It’s a huge get for Amazon, which recently raised prices for Prime subscriptions and has made huge moves to shore up its streaming video content library over the past year. Netflix, which raised its own prices in mid-April, saw its stock price plunge 5 percent the day of the HBO announcement.
Partnering with big names like HBO and Nickelodeon is just one way to lure a cable chord-cutter. A slew of streaming devices have crowded onto the market over the past few years, including set-top boxes like Roku, Apple TV, and Amazon’s just-released Fire TV. Hulu recently unveiled a remote control for subscribers using it on video game consoles.
“It’s all about a land grab right now,” says Tom Caporaso, CEO of Clarus Marketing group, a technology company focused on subscription commerce based in Hartford, Conn. With rising cable bills, people are thinking more about services like Netflix and Amazon Prime being their primary viewing engines. As that changes, those companies are out there really tying to grab consumers and earn their loyalty early.”
The rise of mobile viewership is another factor. As smart phones and tablets become more pervasive, the amount of video viewed on mobile devices is surging, and advertisers are investing more and more in digital media. That makes investment in the streaming space all the more crucial.
In addition to technology rollouts and content partnerships, Amazon, Netflix, and Hulu have all made big investments into original programming. Netflix struck first, with the comedy “Orange is the New Black,” and the drama “House of Cards,” starring Kevin Spacey. Amazon found success with its first original series, “Alpha House,” a political comedy starring John Goodman. Putting money behind new shows “is why we’re seeing price increases, but it’s also a way to get people sucked into the service and convince them to stay with it,” Mr. Caporaso notes.
All of this is designed to take capitalize on a sea change in the way people consume entertainment. Five million cable TV subscribers with the nation’s major providers have dropped their service over the past five years; Time Warner Cable lost 306,000 TV subscribers in the third quarter of 2013 alone.
“A good analogy is the emergence of smart phones,” Mr. Caporaso says. “People would have never thought about not having a phone wire in their house 15 years ago. But as the technology improved and the reliability [of mobile phones] increased, people were more comfortable with it. You probably don’t have a house phone anymore, and I think in two or five or 10 years, more and more people will not have a cable wire in their house.”
So, as the streaming marketplace becomes more and more crowded, which company will come out on top? Netflix was among the earliest to make a dedicated push toward streaming, and its business, once primarily driven by its DVD mail service, has grown to over 40 million digital subscribers globally. It’s also had the most early success with original content: “House of Cards” won three Emmys and a Golden Globe for 2013, and the documentary “The Square” earned the company its first Oscar Nomination. Netflix was also the first to do away with appointment TV altogether, releasing whole seasons of its shows all at once instead of episode by episode.
Still, “the two I’d get behind are Apple and Amazon, because they do so many things so well,” Caparuso says, pointing out that both can lure consumers with new technology, as well as programming, and they have a lot of cash to spend. “But they’re all really good companies.”