Apple better hope there aren’t too many people like Ken Johnson, who’s hopped out of the video streaming pool and doesn’t miss it a bit.
The Milwaukee, Wisc.-area married father of two was soaking in subscriptions for years. But then he did the math, smarting from a one-two punch in higher rates from Hulu and Netflix NFLX, -1.71% earlier this year.
The finance professional realized he could save $30 monthly by opting for cable, dropping his Hulu account, letting his Amazon Prime AMZN, +0.54% account expire and putting an eventual bulls eye on his Netflix account. His HBO account T, +2.01% will also meet its maker after the final “Game of Thrones” season, he said.
“They basically invented a more expensive cable without the benefits of monopolistic power to spread out that cost,” Johnson, 36, said of all the many streaming services, with smaller individual bills that packed a wallop to the wallet when put together.
‘Once you get beyond three services, you’re kind of maxing out.’ —Emily Groch, director of insight, telecommunications at Mintel Comperemedia
“I think it’s too much and it’s getting too expensive,” he said.
After Apple’s star-studded streaming announcement, experts told MarketWatch that consumers still have the mental bandwidth and budget for some more content — but say that legacy cable and media companies shouldn’t push their luck. Many viewers are closing in on the tipping points for what they can handle, they said.
“Once you get beyond three services, you’re kind of maxing out,” Emily Groch, director of insight, telecommunications at Mintel Comperemedia, a market research firm.
Apple AAPL, -1.03% hopes it can be one of those three — just like Netflix, Amazon Prime, Hulu, Sling TV, Roku ROKU, -3.87% and FuboTV. AT&T and Disney DIS, +2.18% also plan to wade into streaming game.
That’s not an exhaustive list of subscriptions, yet it shows how quickly consumers can get exhausted by everything out there in the massive market.
“It’s really going to take something groundbreaking to tip beyond the three-service threshold we’re at now,” Groch said.
When Mintel Comperemedia talked to 2,000 consumers in fall 2018, it found 53% of consumers said they were satisfied with the video content they had. The participants had around two to three services, and the median monthly bill was $25, Groch said.
A mere 13% of people polled said they’d get another service if they could, while one-quarter said if they were to buy another streaming service, they would eliminate an existing one, she said.
Global subscriptions to online video services, like Netflix and Amazon Prime, surpassed cable television accounts for the first time in 2018.
Others say there’s definitely room to grow in the market — as well as consumers’ viewing queue, said Daniel Ives, managing director, equity research at Wedbush Securities.
Global subscriptions to online video services, like Netflix and Amazon Prime, surpassed cable television accounts for the first time in 2018, with 613 million subscribers compared to 556 million cable watchers, the Motion Picture Association of America said recently.
Many consumers now spend about $15 to $30 on their monthly video-streaming subscriptions, Ives said.
About $45 dollars to $50 monthly was as far as most consumers are willing to pay in total for streaming, Ives said. If $45 to $50 is the most consumers are willing to spend, there’s still some room for Apple to make money, he said. In three to five years, they could have up to 100 million users, he added.
That’s the upper limit where consumers still believe they are saving money compared to a monthly cable bill that could average around $85 to $90.
“We believe there’s a clear opportunity for Apple to go after this market and monetize it,” he said, emphasizing that Apple was coming with a built-up distribution network of 1.4 billion iPhone users. (Apple did not immediately respond to a request for comment.)
Oprah Winfrey made the same point speaking at Apple’s reveal Monday: “They’re in a billion pockets, y’all,” she told the Cupertino, Calif. audience.
Apple’s announcement didn’t include what video streaming would cost customers, which left some analysts cool.
‘No one has really cracked the nut of making the wealth of streaming content option less overwhelming.’ —Emily Groch
Video streaming wasn’t the only new service the tech giant announced Monday. Apple said it was also getting into game streaming, a news bundling subscription offer and an Apple Card.
But it was the streaming service that had the Hollywood star power, like Winfrey, Jennifer Aniston, Reese Witherspoon and Steve Carrell talking about their work on the new platform.
For all the advances and choices, Groch said there’s something that’s eluded all the players in the streaming game: a simple user experience.
“No one has really cracked the nut of making the wealth of streaming content option less overwhelming,” she said.
Back in Wisconsin, Johnson’s taken it upon himself to keep things simple. He’ll plan to get the Disney service for his kids, but isn’t interested in what Apple’s doing.
Johnson noted he was quick to get into streaming, starting around 10 years when it was a neat free add-on to his Netflix DVDs. “I’m an early adopter in getting out of it,” he said. “In the next couple years, people are going to be, like, ‘I’m really not saving money.’”
Apple’s stock is up almost 19% year to date. The S&P 500 SPX, +0.72% is up about 12% over the same period and the Dow Jones Industrial Average DJIA, +0.55% is up almost 10%.
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