Update: Disney+ launches today, and you can purchase it for $6.99 a month, or $12.99 bundled with Hulu and ESPN+. Early reports say the streaming service is suffering login problems and missing content, but if you’re interested in streaming Disney classics, Star Wars content (including the new Mandalorian series), the Marvel Cinematic Universe and more, well, this subscription in your entry point.
And now, our original coverage...
Allow me to recap a series of recent events in the world of streaming video:
- In late February, Hulu dropped the price of its ad-supported service from $8 per month to $6 per month. It also started bundling subscriptions with Spotify Premium ($10 per month) for free in March as a limited-time offer.
- Last month, Disney announced an aggressive price of $7 per month (or $70 per year) for its Disney+ streaming service, which will launch in November. Disney has also hinted at bundling Hulu and ESPN+ with Disney+ for further discounts.
- Last week, YouTube announced that Cobra Kai and other original shows will become free (with ads) this fall, so they’ll no longer require a $12-per-month YouTube Premium subscription.
- Also last week, Viacom started streaming classic shows from MTV, Nickelodeon, Comedy Central, and more for free on Pluto TV. Viacom acquired Pluto TV in March, seeing a bigger opportunity in ad-supported streaming than in premium subscriptions.
While these events might seem unconnected, together they demonstrate how a new kind of a la carte TV is emerging, in which media companies must compete directly for your money. Outside the confines of bloated channel bundles (which, by the way, keep getting more expensive), many of these services will discover that they can’t get away with charging too much for TV. Some will have to charge less, while others will have to abandon mandatory paywalls in favor of free streaming with ads.
In other words, competition is keeping prices in check. This is the system working as it should.
The upside of “subscription fatigue”
Read enough articles about the business of streaming video, and you’ll probably come across the phrase “subscription fatigue.” It refers to the idea that people will only tolerate so many subscription services—video or otherwise—before they start tuning out additional options. Cord-cutting naysayers like to portray subscription fatigue as a problem for consumers, because you can’t simultaneously subscribe to Netflix, Amazon Prime, Hulu, HBO Now, Showtime, CBS All Access, Disney+, and so on without paying cable-like prices.
Of course, no one subscribes to all of those services at the same time, which means subscription fatigue is a bigger problem for streaming video companies than for consumers. The price drop by Hulu, the aggressive pricing for Disney+, and the rise of ad-supported streaming all reflect the fact that most households are perfectly capable of voting with their wallets. If media companies want people to watch their shows at all, they’ll need to adapt to this reality.
Services that haven’t launched yet will feel the most pressure. After Disney announced its $7-per-month price for Disney+, a wave of headlines declared trouble for upcoming streaming services like Apple TV+ and WarnerMedia’s HBO-based service, especially if they don’t price themselves fairly. Industry analysts have expressed similar concerns, and even AT&T CEO Randall Stephenson acknowledged that he was “impressed by what Disney did.”
Even Netflix, which earlier this month enacted its second price hike in less than two years, isn’t immune to competition. In a recent survey by Streaming Observer, 12.3 percent of respondents said they “might” cancel Netflix for Disney+, while 2.2 percent said they “definitely” would. While I wouldn’t put too much faith in what people say they might do, Disney+ could certainly act as a competitive check on future Netflix price hikes. One might even argue that Netflix is raising prices now to avoid a larger revolt later, when more alternatives are available.
New-school a la carte
About four years ago, I wrote that a la carte TV was happening, but not in the way that people might’ve expected. Back then, TV networks had little interest in selling their cable channels individually, and for the most part they still don’t. As a result, a subset of cord-cutters are turning to standalone services like Netflix—and to over-the-air antennas—to escape more expensive channel bundles. Live TV streaming services like Sling TV and YouTube TV aren’t making up for traditional TV’s losses.
This approach to cord-cutting continues to have limits. Many live sporting events remain locked inside of pay TV bundles, as does cable news and some popular TV shows. And even within a streaming service like Netflix, you can’t pay less for a subset of its programming (though you could temporarily stop subscribing to defray the cost.) As always, saving lots of money with cord-cutting still requires giving some stuff up.
The rise of an alternative la carte system, however, is playing out in exactly the right way. Not happy with the quality of Netflix’s originals? Just switch to Hulu, where much of Netflix’s old licensed catalog ended up. Don’t care all that much about superheroes and Star Wars? Maybe an HBO streaming service will be more to your liking. Worried that Apple won’t have enough to watch on its TV+ service? You can wait on the sidelines to see how it plays out.
Thanks to this newfound buying power, media companies are starting to rethink what they need to offer and how much they can charge for it. That certainly beats being told that you have to pay for everything regardless of the cost.
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