(Bloomberg Opinion) -- Media giants such as AT&T Inc. know that it’s no longer enough to simply offer their own versions of Netflix. They’re now under pressure to differentiate their streaming-video products. That’s because, at some point, there will be an industry shakeout, and this crowded market for TV apps, which are already difficult to run profitably, will be whittled down to a handful of main competitors.
The competition is no longer mainly with old-school cable packages; rather, it’s with other streaming apps. Already, growth has slowed or turned negative for products like AT&T’s DirecTV Now and Dish Network Corp.’s Sling TV. That sheds light on some recent moves by these companies, and they speak volumes about the state of the industry when taken as a whole.
Take DirecTV Now. Its website contains this table comparing its cheapest package to that of its rivals. The fact that DirecTV Now carries Viacom Inc.’s channels, such as MTV and Nickelodeon, is advertised as its distinguishing factor:
That’s interesting, because it was just a couple of months ago that DirecTV Now had dropped Viacom entirely from its service (ahead of what also became a contract dispute between the DirecTV satellite business and Viacom). DirecTV’s parent, AT&T, called Viacom’s channels “no longer popular,” as it looked for ways to slim down the content on its products in a bid to save money and boost profit margins. AT&T and Viacom ended up resolving the matter, and now, not only are Viacom’s networks back on the streaming app, they’re also evidently the selling point. AT&T’s about-face shows how it’s desperate for ways to pitch DirecTV Now as better than the dozens of other video apps out there, as cord-cutters begin to settle on a chosen few.
Price is another way these apps are starting to compete with one another. DirecTV Now went through a period of raising prices, which predictably led to an exodus of subscribers, a trade-off that, again, AT&T was willing to accept to drive profitability and help pay down its exorbitant debt. However, the service has recently been trying to win back former customers by offering discounts at the rate they had been paying before the latest price hike:
Dish’s Sling TV, one of the earliest movers in streaming, has resorted to offering a whopping 40% discount on all of its packages for the first month to try to entice more subscribers who have more alternatives than ever before.
The pressure will intensify after Walt Disney Co. launches the Disney+ app on Nov. 12 at the relatively low price of $6.99 a month. Disney+ on its own doesn’t have the diversity of content offered by the cable-like multi-channel services such as Sling TV and DirecTV Now, but Disney has a plan to also bundle Disney+ with Hulu and ESPN+ for customers who want a more complete package.
Aside from DirecTV Now and the HBO apps, AT&T has another offering on the way that will leverage all of its assets acquired in last year’s $102 billion deal for Time Warner. The new app will be anchored by HBO, but also include Warner Bros. films and re-runs of hit shows like “Friends” and “The Big Bang Theory.” In another sign of pricing pressure, some analysts expect it will cost only a few bucks more than the $15-a-month HBO Now app that currently exists, even though it will contain much more content. At the same time, it needs that additional content to round out the app because with “Game of Thrones” now over, it’s unclear whether HBO is still a must-have.
For many people, I predict Netflix will continue to be their base subscription, which means all these other apps are basically competing to be the Netflix add-on (with Disney’s bundle as the possible exception). And while these products aren’t financially viable businesses at these rates, this is the time when they need to be building dedicated fan bases because it’s far too easy to unsubscribe – just a few clicks, no dreaded 1-800 numbers – if subscription fees go up or content goes stale. The media moguls know that there are far more streaming apps today than there will be in a few years’ time, and they all want theirs to be the last ones standing.
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Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.
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