- Quarantines have boosted streaming video usage but spiking job losses may not bode well for subscription video services.
- Big media companies have started to offer free video offerings for content that is typically pay-walled.
- User-generated free services like Tiktok, Instagram, Twitter and YouTube may ultimately be the winners over all subscription services.
Back in our salad days, back when we were young and innocent, back on March 11, I wrote a column about how coronavirus quarantines could be an ideal time for subscription streamers Quibi, HBO Max and NBC's Peacock, all of which plan to launch in some form in April and May. After all, streaming video usage would surely increase with everyone stuck at home with few other entertainment options.
What I didn't consider is just how dramatic the explosion of job losses would be, with more than 10 million Americans filing for jobless claims in two weeks and the unemployment rate jumping to its highest point since August 2017 in just one month. Those numbers are just a hint of what's to come, as The Bureau of Labor Statistics used the week ending March 12 as its reference period, largely before nationwide shutouts kicked in. J.P. Morgan's Jesse Edgerton estimates another 7 million new claims to be reported for the week ending April 4.
That's made me reconsider how many Americans are going to jump at spending any extra money on streaming services while they're stuck at home. Instead of cementing subscription streaming services into daily life habits, it's possible quarantines will actually showcase the value of free streaming — particularly user-generated content.
"With so many people staying home, we're all going to see a lot more media consumption," Adam Mosseri, Instagram's chief executive officer, said on The Byers Market podcast last month. "More of the new content, if staying at home lasts months, and I think it will, will come from people and not studios over time."
More people are spending watching video during quarantines, which, of course, is better for subscription streaming than the alternative. Comcast reported peak traffic is up 32% overall between March 1 to March 30. Comcast's streaming and web video consumption is up a 38%. Verizon has experienced similar trends, with video traffic up 32% over an average day, a spokesperson told CNBC. And live sports continue to be canceled without an end in sight, making traditional pay TV seem even more expensive as a value proposition just as new streaming products hit the market.
But as quarantines move into April, with no end in sight, Americans will revalue how they spend their free time, especially if they're suddenly jobless and unable to visit friends and family. That's likely to benefit entertainment options with personal interaction and instant response from friends, such as Internet-connected video games, Twitter, Instagram, Tiktok and YouTube. I'm not sure there's any content I'd rather watch right now than the Marsh family's at-home rendition of "One More Day" from "Les Miserables."
The top three applications by usage on Verizon's wireless network in March were YouTube, Facebook and Instagam, according to a Verizon spokesperson. User-generated content is instant and fresh, documenting at-home life, while on-demand Hollywood shows will fill an escapism niche but may feel less immediate and more anachronistic as quarantines continue.
"The need to connect with people you know is going to continue to exist, the need to be entertained is going to continue to exist, but the distribution time between one and the other will shift," Mosseri said.
The problem with free, ad-based services is they still require ads. And global advertising is expected to go through a giant slump as the economy recedes. The Cannes Lions International Festival of Creativity, the most important annual global ad conference, was canceled Friday as "customers' priorities have shifted to the need to protect people, to serve consumers with essential items and to focus on preserving companies, society and economies," organizers said in a statement.
While running a business that relies only on advertising revenue isn't a good place to be in a downturn (see: all digital media companies), if you're Instragram or Google or Facebook and have already achieved massive global scale, cementing your products in the daily routines of people's lives is likely more important than short-term declines in advertising revenue.
Big media companies are already shifting gears to offer more free content. HBO announced yesterday it was making many of its hit shows free for a month. Fox is allowing anyone to watch cable network Fox News for free. Verizon has developed a free weekly streaming entertainment series in support of small businesses with home concerts from artists such as Dave Matthews and Ryan Tedder. Fios TV customers who don't currently subscribe to select premium channels are getting access to 30 days of free premium programming, including Showtime and Epix.
Media journalists, 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 fee. Outgoing WarnerMedia CEO and current AT&T Chief Operating Officer John Stankey told CNBC last year he suspects four or five streaming services will "win" the streaming wars, with all others failing to survive or make a dent in the public consciousness.
But "The Streaming Wars," in a vacuum, simply pits subscription products against other subscription products. It doesn't consider all of the free video options that also compete with subscription streaming services for time. Netflix famously alludes to this by saying one of its biggest competitors is sleep.
Some subscription streaming services may be better positioned than others for a world when households are looking to tone down discretionary spending.
NBCUniversal's limited version of Peacock will be free and its beefed up version will be free to Comcast subscribers later this month. Quibi, which debuts April 6 in the U.S. and Canada, will be free to some T-Mobile subscribers for a year. It's also free for 90 days for anyone who signs up in April. Netflix already has a similar deal with T-Mobile. Disney+ is free for a year for some Verizon subscribers. AT&T subscribers who already subscribe to HBO will all get HBO Max for free. Apple TV+ is free for a year for customers who purchase a new Apple device.
Unfortunately for new competitors, giving away subscriptions for free and then pulling the rip cord to make consumers pay is very tricky. It's what has plagued Groupon for years — offering products for free can condition people to lower their inherent value of those goods.
So, while I suggested less than a month ago that quarantines would be good for Quibi, Peacock and HBO Max, the competing hurricane of an economic downturn will test that theory.
The streaming video winners may actually end up being the companies that already have strong install bases — companies that have achieved near utility-like statuses in consumers' minds. That's Netflix, more than anyone, with more than 160 million global subscribers and about 60 million U.S. customers. Amazon Prime is a close second with more than 150 million members worldwide. Disney may be in decent shape too, having already hooked nearly 30 million U.S. customers to Disney+ by early February after debuting in November. HBO has about 35 million U.S. subscribers and about 140 million globally.
That's four subscription services in a world where Stankey predicted only four or five could survive.
Maybe the streaming wars should be called the streaming wars of attrition.
Watch: AT&T's John Stankey on market swings, coronavirus and HBO Max launch