Q&A: Tired of Paying for Separate Streaming Services? A Solution Has Arrived

But fear not, said University of Virginia Darden School of Business professor Anthony Palomba, the Netflix-Max partnership is likely to be the way of the future. And that’s not only good news for consumers trying to save money, but for streaming platforms trying to stay afloat. 

UVA Today caught up with Palomba, an expert in the media and entertainment business, to learn more about the trend. 

Q. Why do you think streaming services are starting to come together to offer bundle packages instead of trying to compete for consumers?

A. It makes sense to do this. There’s just so much content to keep track of. From a consumer behavior standpoint, it’s quite difficult to parse all of this out. 

It will aid consumers in making trade-offs that are clearer. It’s very difficult to figure out the trade-offs among eight streaming services. It’s far easier to look at three or four bundles and figure out the trade-offs. Of course, streaming service menus are replete with TV series, movies and other content to demonstrate up-front value. However, this can undermine the user experience.

This is a far cry from what our parents faced in determining viewing options decades ago. Through satellite or cable television, there were two or three options available from each service. The primary decision point was access to channels. But the change that’s come with [subscription video on demand] services doesn’t concern access to channels. Netflix is the channel. Hulu is the channel. What the trade-offs revolve around are the kind of content you have access to. That’s hundreds and hundreds of shows to consider. Most consumer don’t have the domain expertise necessary to know where to find content. 

So, I think with these bundling options, you’re able to get a better sense of which types of content you have access to. 

I think these bundling services not only will be the future, but are also a steppingstone for a lot of these firms in understanding what’s popular. Right now, there is no audience metric or measurement that’s widely agreed-upon. Nielsen’s kind of faded away, and I think there’s enough stakeholder distrust of Nielsen that it won’t come back to the audience measurement marketplace. So, this is also a boon for a lot of these firms to begin to understand how popular their content is, and maybe even sharing data among themselves. 

Q. Does any of this surprise you?

A. No, it does not surprise me. Warner Bros. Television was responsible for “Friends” and “Two and a Half Men,” and at one point was responsible for close to 40 to 50% of all content on television. That means Warner Bros. was making content for NBC as well as CBS and other competitors. 

There’s a long, long history in Hollywood for studios creating content for rival studios and distributors. I think it’s indicative of it being a small community; it’s indicative of finding opportunities to make money. Frankly, when you’re struggling to keep up different revenue streams, it makes a lot of sense. Also, bear in mind that artists (e.g. directors, producers, writers) all shift from movie to movie, TV show to TV show. This is an industry that regularly shuffles workers around, why not output?

Also, internally, it might be difficult to produce all of the content you want. If you hire someone else, you can ultimately produce more content, and you might be able to balance others’ schedules better.

Q. What do you think was a tipping point for rival streaming services to begin thinking about bundles?

A. I think part of it is just churn rates. I do some data science stuff with my own research. It’s problematic from a data security standpoint and a data science standpoint, if you have this constant churn, as you can’t properly measure or gauge what people want. If you’re in and out of the door so much, it becomes transactional and it becomes difficult, I would argue, to properly measure customer lifetime value and to really begin to understand the kind of costs associated with getting somebody versus retaining them. 

As a professor at the Darden School of Business, Anthony Palomba specializes in audience analysis, media innovation and firm competition and entertainment science. (Photo by Stephanie Gross)

Painting with broad strokes, it’s way cheaper to retain somebody than try to find somebody else to replace them if they leave a streaming service. I think that has been a breaking point for many streaming services who are working hard to exploit, refresh, and demonstrate content asset value for investors on Wall Street. 

Q. Beyond the consumers and the services themselves, who else benefits from bundles?

A. This also helps with stock prices. Remember, investors have had a hard time trying to figure out the value of these services. One, there’s no cohesive, aggerate measurement available – Neilsen’s kind of gone. That’s strike one. Strike two is that up until recently, there were no ads. If you can’t show me ad revenue and you’re telling me I need to focus on subscriber growth, which is constantly churning, and I can’t figure out how popular these shows are, how can I begin to do a proper financial evaluation to understand what you’re worth? 

If this can begin to stabilize and cut down on the amount of chaos in the data, that’s far more attractive because the investors want stability. 

Q. Do you have a prediction for the future of streaming subscriptions?

A. Part of me thinks that eventually these services are going to get it together and say, “Let’s all band together. We’ll charge a set price. Everybody will have access to everything. And if we share our data and provide a level of transparency, not only will our stocks stabilize, but we’ll also all collectively as an industry suffer from less churn.”

When cable and satellite channels worked together, there was less churn. People were still upset about satellite and cable services from time to time and complained about periodic cost increases, but when there is market cooperation, there’s a bit more stability. Consider the airline industry. There are airline services like Delta and American who are in direct competition with each other – at every airport, no less! And yet, they constantly work with each over dynamic pricing issues and maintaining high barriers to entering the airline industry.

So, inevitably, I think these services are going to have to learn to work together more, figure out an audience measurement that works for them, and I think it’ll begin to stabilize the industry way more than it already is.