“Kids… Big Ben, Parliament…again.” An appropriate and funny quote from the 1985 classic "National Lampoon's European Vacation" to start this story of access to video content. In this particular scene, Clark Griswold and his family are stuck in a London roundabout and he continues to point out Big Ben and Parliament. If you’re old enough to remember this movie, I’m sure you can picture the scene very well.
As cable and satellite television entered households throughout the 1980s, life was good. We enjoyed access to dozens of channels and a variety of content. We even had specialty channels for sports, cooking, and music – you know, when MTV actually played music videos. Shortly after cable and Satellite TV arrived on the scene, providers began to offer premium channels, as well as pay-per-view content, where you’d actually call in to order an event or rent a newly released movie, both generating new revenue streams for providers and offering more entertainment options for consumers.
Fast forward a few decades, and TV providers began offering hundreds of channels, as well as high definition options, DVRs, and on-demand libraries. Traditional telecom providers entered the video service market and not only were they offering TV, but they allowed people to start bundling their home phone and Internet service with it (often for a small discount). These bundles became the hot ticket for generating not only additional revenue for the larger providers, but also creating stickiness amongst consumers, as it was much more difficult to switch all three services at once than just a single service. The very largest providers could even roll in other services like mobile phones and/or home security. These bundles could cost a consumer hundreds of dollars per month and as content prices started to rise, so did the cost of traditional pay TV, thus driving the cost of the bundles up even more.
Millennials eventually became a new decision maker audience for these household services. They didn’t want to pay hundreds per month (I mean really, who does?) and they didn’t need a home phone, as they’ve grown up with mobile phones, so the bundles started to lose their appeal and cord cutting began. Enter Netflix and other video streaming providers, who quickly followed in their footsteps, like Hulu and Amazon Prime. Why pay more than $100 a month and have to show up at a particular time to watch TV (or pay for DVR service), when you can pay less than $15 and binge watch entire seasons of shows whenever you’d like.
Over recent years, content creators started to see how much opportunity there is in direct-to-consumer streaming services, so content started being pulled back from the aggregating streaming services and new platforms from content creators continued to come to market. This eventually led to the initial big content aggregators like Netflix, Hulu and Amazon Prime to produce original content, as well as pay more for some of their purchased content. Since they are spending more money and have stockholders to please, this of course raises the costs of those services. However, there has been some great original content that has come out of these platforms, creating demand for particular original shows and movies and thus justifying at least some of the cost increases.
Recent research my company has conducted shows the average household uses five to six streaming services. We have captured awareness and usage for nearly 200 streaming services. We are seeing that consumer spend on these services is increasing both due to increasing service costs and the fact that they are paying for multiple services. This has led some consumers to subscribe to streaming services for brief periods to catch up on content of interest, then cancel it, only to re-subscribe again for a short time, when specific content is released.
To mitigate these yo-yo consumers and attract new customers, we’re seeing larger players in the industry resort back to bundling services, as Disney has done with streaming services – bundling Disney+, Hulu and ESPN+, or as they did with Verizon’s unlimited mobile data customers, through a partnership. All to create that bundle stickiness and allure that was so successful, years ago. Although AT&T and Comcast each have new streaming services of their own, they are still clinging to bundles to slow cord cutting as much as possible, despite knowing and investing in streaming as their future.
Even though we’re decades past the original telecom bundles, research and sales continue to tell us there is high perceived consumer value in them and bundles will both attract new customers and lower the churn rate of current customers. So, round and round we go. Despite consumers’ needs constantly evolving, we seem to always come back to service bundles. I look forward to seeing what the next evolution of bundles will look like from what has become a new industry that my colleagues like to call Entercom. As Clark Griswold would say, “Kids… Big Ben, Parliament…again.”
Mike’s curiosity led him into research, where he has worked in the telecom market research industry for nearly 20 years and as telecom blurred into entertainment over the last decade, so has the focus of much of the research Mike and his team has focused on with their clients. As this transition came about, KS&R formed an ‘Entercom’ team, under Mike’s leadership, to better support our industry leading partners. Mike has designed and led research across a number of quantitative and qualitative methodologies from tracking consumer behaviors, service packaging and pricing, concept testing, segmentation, and customer journey mapping; and research topics ranging from old school POTs (plain old telephone) to the latest in streaming and social video.
Mike holds a masters degree in public administration from the Maxwell School at Syracuse University and a bachelors in business administration and economics from the State University of New York at Oswego. Prior to entering the research world and joining KS&R, he served as an officer in the Army and NY Army National Guard. Mike is an avid outdoorsman and boater, a father of 4 and husband to Christina Bard for the past 17 years.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.