Freebies are the key hook in new ‘streaming wars’
If you make it free, will they come?
Apple, Disney and AT&T’s WarnerMedia want to jump-start their challenges to Netflix by offering freebies and deep discounts on emerging streaming plans.
That includes a free year of Apple TV Plus for customers of new Apple devices and a free year of Disney Plus to higher-tier Verizon customers. Some existing HBO subscribers will also get the super-charged version, HBO Max, at no additional cost.
Experts say these services can worry later about holding onto customers — perhaps by offering must-see shows they can’t get anywhere else or tying discounts to other services that are difficult to drop.
“Next year is a race to aggregate consumers,” said Kevin Westcott, who heads Deloitte’s U.S. telecommunication, media and entertainment consulting business. “The first war is getting them to sign up for a service. The second war is retaining them.”
The new services have to attract users with marketing blitzes and the promise of original shows and movies, then build a big enough library of old favorites to help keep them. Already, HBO Max will have “Friends “ exclusively, and Disney is taking back its older movies from Netflix.
A lot of shows and movies won’t be available at launch, but will be added over time. Free helps in the meantime.
Netflix has spent years building up its 158 million subscribers worldwide. Hulu has 28 million. The new players want to ramp up subscribers quickly to show they can compete.
So the services have launched the digital equivalent of the old cable promos: lure you in with discounted rates, then jack up the price after a year or two. But digital customers have more choices than cable customers of yore so a big question is whether they’ll stick around.
Apple TV Plus debuts Friday for $5 a month with just nine shows and a few more coming soon. It’s already cheaper than the $13 a month Netflix charges for its most popular plan. Buyers of any new iPhone, iPad, Apple TV, Mac or iPod Touch get a year for free. That suggests a market of 40 million customers, Wedbush analyst Dan Ives said.
Disney Plus, which arrives Nov. 12, is also cheaper than Netflix at $7 a month. Disney struck a deal with Verizon to give customers of all unlimited wireless plans and some home-internet customers a free year. Members of Disney’s free D23 fan club were also eligible to buy three years of Disney Plus service up front for the price of two years. Disney is targeting 60 million to 90 million worldwide by 2024.
AT&T’s HBO Max, which launches in May for $15 a month, is the most expensive of the new services. That could make it tough for AT&T to reach its goal of 50 million U.S. customers and 75 million to 90 million worldwide by 2025.
But AT&T will make the service free for about 10 million existing HBO subscribers, or about a third of its U.S. subscribers. HBO Max will also be included with AT&T’s higher-tier wireless and broadband offerings.
Comcast’s Peacock service will be free for many of its own cable and internet customers. The regular price hasn’t been announced yet. The service launches next spring.
“I don’t think customers are going to have to make difficult choices about cutting one in order to add another for the first few years,” said MoffettNathanson Research’s Craig Moffett.
But companies can’t run the services at a loss forever, and when discounts end and prices rise, customers may flee. After all, the services add up fast, and signing up to multiple ones could end up costing as much as the cable packages people are ditching for streaming.
There’s a lesson to be drawn from the latest TV-industry attempt to counter cord-cutting. Cable-like online packages like Sling TV and YouTube TV have ended discounts or raised prices, causing customers to flee and new sign-ups to slow down. Sony announced Tuesday that it will quit offering PlayStation Vue, one of the first to challenge traditional TV packages.
Even the dominant player isn’t immune. Netflix has raised prices slowly, which helped shield it from price shock, but its latest small increase has hurt customer growth.
Westcott, the Deloitte consultant, compared the streaming promotions to efforts to lure wireless customers from competing companies.
T-Mobile has long offered Netflix free to many customers. Verizon includes six free months of Apple Music with some of its unlimited plans. Many offer other deals like paying off your phone early or getting a phone for free if you switch.
“They were constantly looking for ways to steal you off other players,” he said.
How will these services keep users once they’ve reeled them in?
The companies can constantly refresh their services with new shows and movies, Diffusion Group president Michael Greeson said.
Cathy Yao, an analyst at Diamond Hill Capital Management, also said companies can try to create “stickiness” by bundling the services with other products and services so a customer is less inclined to unsubscribe.
For example, including HBO Max with wireless and broadband services will make consumers more likely to stick around for all three, Yao said. It’s similar to how Amazon packages its streaming service with its $119-a-year Prime loyalty program.
Ultimately, content will be king, experts say. The services are investing billions into creating new shows and building up their libraries to find or create the next “Stranger Things.”
Apple TV Plus inked high-profile deals with Oprah Winfrey, Reese Witherspoon and Jennifer Aniston. Comcast’s NBCUniversal reportedly paid $500 million to take back “The Office,” and Netflix reportedly paid even more to claim global rights to “Seinfeld.”
“The weapon of choice for retention is exclusive programming,” said Peter Csathy, founder of Creatv and an industry consultant. “All of these behemoths are investing billions of dollars in originals with the hope of finding the next ‘Game of Thrones’ that becomes ‘Must See TV.'”
Beyond Netflix: A look at what you get with new streamers
Attention binge watchers: There’s life beyond Netflix, Hulu and Amazon.
Streaming choices are about to proliferate with the debut of Apple TV Plus on Friday and Disney Plus in two weeks. HBO Max and Peacock arrive next year. With discounts and other incentives, consumers can sample them all to figure out which ones to keep.
Here’s a look at the new streaming challengers and what you get with each:
APPLE TV PLUS
Apple’s entry into the streaming business.
Launch date: Today
Price: $5 a month
Promotions: Seven-day free trial. A year free to buyers of a new iPhone, iPad, Apple TV, iPod Touch or Mac.
Original shows: A Jason Momoa series called “See” and “The Morning Show,” a comedy starring Jennifer Aniston, Reese Witherspoon and Steve Carrell. The service will launch with nine original shows and movies, with more expected each month.
Other shows and movies: None.
Disney’s entertainment service, featuring shows and movies from Disney, Pixar, Marvel, Star Wars and National Geographic.
Launch date: Nov. 12
Price: $7 a month or $70 a year. Getting Disney Plus with ESPN Plus and Hulu, both owned by Disney, will cost $13 a month.
Promotions: Seven-day free trial. Free year with all Verizon Wireless unlimited plans and when customers switch to Verizon’s Fios Home Internet or 5G Home Internet.
Original shows: “The Mandalorian,” a live-action “Star Wars” series created by Jon Favreau. A prequel to the “Star Wars” movie “Rogue One.” A series about the Marvel character Loki. A rebooted “High School Musical” series. A documentary series focused on Disney.
Other shows and movies: Animated classics, including “Aladdin” and “The Jungle Book,” will be available at launch; others will be added as streaming deals with other services expire. Movies released in 2019 or later will go to Disney Plus rather than a rival streaming service first. Disney Plus will also house past seasons of “The Simpsons,” which Disney got through its purchase of Fox’s entertainment business.
The service from Comcast’s NBCUniversal will carry 15,000 hours of video at launch.
Launch date: April 2020
Promotions: Free for many Comcast cable and internet customers.
Original shows: Reboots of “Battlestar Galactica” and “Saved by the Bell.” Comedy series “Rutherford Falls,” from Michael Schur, creator of “The Good Place” and “Parks and Recreation.”
Other shows and movies: “30 Rock,” ?Will & Grace,” and “Cheers,” though these won’t stream exclusively on Peacock. Peacock will get “Parks and Recreation” and “The Office” once existing deals with Netflix expire. “Bridesmaids,” ”E.T.” and other movies from Universal Pictures, Focus Features and DreamWorks Animation.
A souped-up version of HBO from AT&T’s WarnerMedia, with some 10,000 hours of video at launch.
Launch date: May 2020
Price: $15 a month
Promotions: Free for about 10 million existing HBO subscribers — those who get HBO through AT&T distribution platforms such as U-Verse and DirecTV, and those who get the HBO Now streaming service directly from HBO, rather than a cable or online partner such as Amazon. Free for customers of AT&T’s higher-tier wireless and broadband offerings.
Original shows: A “Game of Thrones” prequel called “House of the Dragon.” ”Raised by Wolves,” a sci-fi series directed by Ridley Scott. “Strange Adventures,” a DC Super Hero anthology series.
Other shows and movies: HBO shows and movies, including theatrical releases that HBO licenses. Programs from the Warner Bros. studio, including “Friends,” ”The Big Bang Theory,” ”The Fresh Prince of Bel Air” and “Pretty Little Liars.” The animated comedy “South Park.” New CW shows “Batwoman” and “Riverdale” spinoff “Katy Keene” will also be available to stream after the season ends.