Commentary

Streaming Entertainment: There May Be A Financial Cap For Consumers

• by Wayne Friedman , Staff Writer, November 14, 2019

Looking for streaming video trends may be tough to come by. A rough picture may be to look at the past -- where the physical video industry has been, in terms of overall value.

We speak of DVDs, Blu-ray discs and even videotape.

In 2005 -- the entire home video market, comprised mostly of physical video products, DVDs, Blu-Ray discs, and other sales --- was around $25 billion. The bulk of this being $16 billion in DVD sales alone.

What’s the entire home video market now in 2019? Also, $25 billion. DVD sales have dropped to $2.2 billion, with total annual streaming services now at $15 billion annually.
This may sound crazy. But, for some analysts, streaming may have already peaked. “Now the question is: Is $25 billion just the natural cap?” asks Bruce Nash, founder and president of Nash Information Services, in speaking with CNBC.

With new services coming on board -- Apple TV+, Disney+, NBCU’s Peacock, and HBO Max -- this \ doesn't seem to make sense.

But think about this: Two of those services -- Apple TV+ and Disney+ -- are starting out at a modest $4.99 and $6.99 price tag, respectively -- perhaps a super-discounted price. Next year, there has been talk that NBCU’s Peacock may be cheaper. Like free. (OK, HBO Max might just ruin this far-fetched analysis with its $16 a month price tag.)

Analyzing a $4.99 or $6.99 price tag may tell more. In 2005, that might have been the average price for a single purchase, perhaps rental, of a movie.

No doubt there are plenty of estimates that the new TV-video streaming businesses will expand consumers' total monthly entertainment dollars. But by how much?

If consumers are paying $80 to $120 a month for total home TV entertainment -- on-demand, streaming, traditional pay TV providers, individual movie/TV subscriptions -- do we really think this number will rise 10%, 25%, or 100% over current levels?

How much much more can consumers pay for entertainment per month?

Traditional media companies continued to worry about how to push new streaming services, while maintaining legacy pay TV distribution revenues -- a business that will continue to dominate their financial quarterly earnings reports for years to come.

Cord-cutting isn’t just the name of a trend. In years to come, that activity will need a new definition/name -- especially if it increases 5% or 10% or more a year. Cord-slashing? Cord-crashing? Maybe that will get legacy media’s attention.