Lots of proof this week that over-the-top content – especially if its content that people actually want to watch, which up to now hasn’t always been the case – has almost unlimited potential to shift viewing habits:
- Netflix reported continued subscriber growth, adding 1.7 million subs in the first quarter alone – that’s more than 14 million video subs in total (not to mention quarterly income of $493 million, up 25%, and entering “real numbers” territory). Even more significant on the over-the-top front, Netflix reported that 55% of its subscribers streamed a TV show or movie during the quarter, up from 36% a year ago. Over-the-top helped Netflix with churn too:
[CEO Reed Hastings] said on the call that Netflix attributes this quarter’s record low churn to an increase in streaming. Moreover, the company’s investment in streaming titles, as well as the availability of the service across multiple devices and an improved user interface, is driving more subscriber additions through word of mouth, therefore lowering Netflix’s cost of adding new subscribers.
- Perhaps even more threatening to incumbent video providers, Hulu said it will start testing a $10 per month subscription service featuring show backlogs (rather than just the most recent episodes). That puts it perhaps more in competition with DVD sales, since most cable or IPTV providers don’t offer a similar service. But it could establish new user viewing patterns too focused around hits and viewer favorites.
- Finally, YouTube got some attention this week for offering video rentals at youtube.com/store. Selection is limited and not focused on hit movies or shows, but it offers users another place for quick, cheap online rentals beyond iTunes and Amazon.
Connected Planet’s Take, Dan O’Shea:
Do these moves represent a last hurrah for the video rental and OTT players as they prepare to dig in against the imminent arrival of hybrid walled garden content plays from service providers? As Netflix continues to gain subscribers, find success in streaming and watch its stock price move upward, it certainly doesn’t look like a company in desperation mode.
What about Hulu, finally succumbing to the realities of operating a business? Will the fee send its explosive growth into reverse? Though Hulu does face a real threat from TV Everywhere walled gardens (Oh, the irony of those four words pushed together…), it is tentatively planting its flag on an island that the service providers’ lumber-laden ships may not be able to reach. The price tag may be low enough for Hulu to both retain viewers, while the backlog strategy gives them more to watch and buys Hulu more time to develop more ways to differentiate itself.
And even YouTube, though heading down a worn path, may have something to gain in terms of business stability from Google’s recent acquisition of Episodic. In addition, the promise of profitability still looms on the horizon.
The giants of OTT may not be ready to be conquered as easily as service providers might have hoped.
“Hulu, finally succumbing to the realities of operating a business”
What? I know that well-worn phrase sounds good but in this case it is inaccurate. Hulu had an estimated $12 mil profit in 2009. Which is a reasonably good business reality. Their business model – so far – has been much the same as that of TV networks – sell ads.
Netflix works so well and offer such great content, live news not taken into consideration, that I am very likely to drop our cable subscribtion when the contract price is up for renewal. Most of us have no need for \\"500+\\" channels, but will pay (reasonably) for the ability to view great content at a time of our liking. When that content is delivered without interrupting ads, we as consumers are happy and will continue to pay for such service.
The cable companies have many times shot themselves in the foot by trying to mimick services (like VoIP, or Video on Demand) only to deliver such services at premium prices compared to what is available elsewhere. I think they are however slowly waking up to realize that \\"connectivity\\" is the name of the game.
Pushing preformatted (and ad supported) content at a time of \\"their\\" choosing does no longer work for a consumer where \\"time\\" is a scarce resource. \\"If you want to reach me, on my time, you\\\’d better have something good to say\\". Regular broadcast TV is likely doomed, maybe with the exception of those who passively just waste time in front of the tube.