What I haven’t considered is how dramatic the explosion in job losses would be, with more than 10 million Americans applying for unemployment in two weeks and the unemployment rate reaching its peak high level since August 2017 in just one month. These numbers are just a glimpse of what will happen, as the Bureau of Labor Statistics used the week ending March 12 as the reference period, largely before the national launderings began. Jesse Edgerton of JP Morgan estimates that 7 million new claims should be reported for the week ending April 4.
This made me reconsider the number of Americans who will spend extra money on streaming services while stranded at home. Instead of cementing subscription streaming services into everyday lifestyles, quarantines may enhance the value of free streaming – especially user-generated content.
“With so many people staying at home, we’re all going to see a lot more media consumption,” said Adam Mosseri, chief executive of Instagram, on the podcast The Byers Market last month. “More of the new content, if staying at home lasts for months, and I think it will, will come from people, not from studios over time. “
More and more people are watching videos during quarantine, which of course is better for subscription streaming than the alternative. Comcast said peak traffic increased 32% overall between March 1 and March 30. Comcast’s streaming and web video consumption increased by 38%. Verizon has seen similar trends, with video traffic up 32% on an average day, a spokesperson for CNBC said. And live sports continue to be canceled endlessly, making traditional pay-TV seem even more expensive as a value proposition as new streaming products hit the market.
But as the quarantines move forward in April, with no end in sight, Americans will reassess how they spend their free time, especially if they are suddenly unemployed and unable to visit friends and family. This is likely to benefit from entertainment options with personal interaction and instant response from friends, such as video games connected to the Internet, Twitter, Instagram, Tiktok and YouTube. I’m not sure if there is any content I would rather watch right now than the Marsh family’s home performance of “One More Day” from “Les Misérables”
The top three apps per use on Verizon’s network in March were YouTube, Facebook and Instagam, according to a spokesperson for Verizon. User-generated content is instant and fresh, documenting life at home, while Hollywood on-demand programming will fill an escape niche but may feel less immediate and more anachronistic as quarantines continue.
“The need to connect with people you know will continue to exist, the need to be entertained will continue to exist, but the distribution time between one and the other will change,” said Mosseri.
Adam Mosseri, Facebook
Beck Diefenbach | Reuters
The problem with free advertising-based services is that they still require advertisements. And global advertising is expected to experience a giant collapse as the economy declines. Cannes Lions International Festival of Creativity, the world’s largest annual advertising conference, was canceled on Friday, “customer priorities having shifted to the need to protect people, serve consumers with essentials and focus on preserving business, society and economies, “The organizers said in a statement.
Although running a business that relies only on advertising revenue is not a good place to slow down (see: all digital media companies), if you are Instragram or Google or Facebook and have already reached a massive global scale, cementing your products in people’s daily routines is probably more important than the short-term drop in advertising revenue.
The mainstream media become free
Large media companies are already shifting to offer more free content. HBO announced yesterday that it will release many of its blockbuster shows for free for a month. Fox allows anyone to watch the Fox News cable network for free. Verizon has developed a free weekly streaming entertainment series to support small businesses with home concerts by artists such as Dave Matthews and Ryan Tedder. Fios TV customers who are not currently subscribed to certain premium channels have access to 30 days of free premium programming, including Showtime and Epix.
Media reporters, analysts and investors have spent years discussing “The Streaming Wars” – the battle between Disney, Netflix, Amazon Prime Video, NBCUniversal, WarnerMedia, ViacomCBS, Starz and other media companies for your Monthly subscription. WarnerMedia’s outgoing CEO and current AT&T chief operating officer, John Stankey, told CNBC last year that he suspected four or five streaming services would “win” the streaming wars, all others failing to survive or breach the public consciousness.
But “The Streaming Wars”, in a vacuum, simply pits subscription products against other subscription products. It doesn’t take into account all of the free video options that also compete with subscription streaming services for time. Netflix alludes to it by saying that one of its biggest competitors is sleep.
Some subscription streaming services may be better positioned than others in a world where households are looking to dampen discretionary spending.
The limited version of Peacock’s NBCUniversal will be free and its enhanced version will be free for Comcast subscribers later this month. Quibi, which debuts April 6 in the United States and Canada, will be free for select T-Mobile subscribers for one year. It is also free for 90 days for anyone who signs up in April. Netflix already has a similar agreement with T-Mobile. Disney + is free for one year for certain Verizon subscribers. AT&T subscribers who are already HBO subscribers will all get HBO Max for free. Apple TV + is free for one year for customers who purchase a new Apple device.
Unfortunately for new competitors, giving free subscriptions and pulling the rope to get consumers to pay is very difficult. This has been plaguing Groupon for years – offering free products can condition people to lower their intrinsic value.
So, while I suggested less than a month ago that quarantines would be good for Quibi, Peacock and HBO Max, the competitive hurricane of an economic downturn will test this theory.
The winners of streaming video may actually end up being the companies that already have solid installation bases – companies that have reached near-useful statuses in the minds of consumers. It’s Netflix, more than anyone, with over 160 million global subscribers and around 60 million American customers. Amazon Prime comes next with over 150 million members worldwide. Disney can also be in good shape, having already connected nearly 30 million American customers to Disney + in early February after its debut in November. HBO has approximately 35 million subscribers in the United States and approximately 140 million worldwide.
It’s four subscription services in a world where Stankey predicted that only four or five could survive.
Maybe streaming wars should be called streaming wars.
Watch: John Stankey from AT&T on market fluctuations, the coronavirus and the launch of HBO Max