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By now it has to be obvious to all in the universe the impact that technology can have on the accepted norms of consumer behavior in the marketplace. With the arrival of motorized transportation in past centuries, the established method of delivery of products to consumers evolved from livery; the use of draft animals, wagons and carriages, to mechanical based ground and air delivery systems populated by trains, trucks and planes. Even the most basic advance in technology brought significant logistical improvements and generated irreversible disruption to a once dominate business model.
In the 20th century the advent of satellite and cable technology greatly impacted the delivery of entertainment programing to millions of consumer viewers. The once dominate big three television networks saw their strangle-hold on the viewing public quickly erode as hundreds of new independent producers of entertainment content side-stepped the traditional open-air distribution systems of old. New networks of delivery, called cable and satellite, soon became the dominate giants of home entertainment delivery, ushering in an era where a relatively few consolidated cable and satellite providers ruled the home entertainment industry. However, as history has taught us many times, market dominance once achieved is often quickly followed by the dominate marketer’s demise.
The arrival and advancement of wireless networks capable of streaming video has cable and satellite providers racing to maintain some viable relevance in an industry that they once completely dominated. With live-streaming, consumers are afforded hundreds of new choices of programs through dozens of new delivery sources at a fraction of the previous cost. This new market reality conjures up visons of satellites roaming aimlessly through space and cable providers’ aging infrastructure languishing dormant alongside the roads of America, seeking a new purpose. The visions threaten an historic comparison to watching horses grazing aimlessly in pastures next to their rotting carriages. Dominance in any industry can be very fragile.
As consumers embrace new entrants to streaming services like Netflix, Amazon Prime, Hulu, YouTubeTV and Sling, the once “Kings of Cable and Satellite” find themselves in a marketplace that could soon leave them profitless and irrelevant. According to Leichtman Research Group, streaming services are on the rise with 55 percent of households subscribing to a streaming service. Moreover, 43 percent of U.S. households now pay for more than one streaming video service. Cord cutting is quickly becoming a revolution as consumers relish the sense of beating an unfair and overpriced system with its predetermined, narrow scoped menus and costly program options. Nearly 35 million households have quit cable in the past decade.
Disney, an entertainment producing giant, with one-third of its revenue derived from cable, has experienced a seven-year period of stagnation in its entertainment business. The decline in market position has finally awakened the sleeping giant. Disney is poised to launch its own streaming service called Disney+. The new service will feature Disney’s massive stable of kid-friendly programming, including 13 classic animated movies, 21 Pixar features, original series, and material from its Marvel and Star Wars franchises. Disney + will cost consumers $6.99 per month, undercutting the popular Netflix program by $6 a month. More importantly to the established list of streaming competitors, Disney will be making its wildly popular content unavailable to Netflix and other popular streaming services. The announcement from Disney sparked a sharp decline in Netflix stock prices the day of the announcement.
The prospect of losing any portion of its 60 million household subscribers to a deep pocketed competitor like Disney must be concerning to the Netflix C-Suite, but Disney still has to deliver on a business distribution model that goes directly to the consumer and whose success in attracting market share will likely be dependent on lower consumer prices for the foreseeable future. The calculus must also include the certain diminishing effects the new streaming service will have on Disney’s current, highly successful video and theatrical marketing system.
Hang on viewers! The ride is just getting exciting.