$21: The Amount Consumers Want to Pay Barely Covers Two Services
We've written a lot here in the past few weeks about the challenges facing successful streaming services like Netflix, struggling ones like DirecTV Now, and as-yet-unlaunched ones from AT&T and NBCU. We've talked about the competition aggregators will face from direct-to-consumer and owned-and-operated offerings, and we've talked about the fact that there's simply too much content for the average viewer to possibly keep track of. But there's another foundational problem that will make all the other challenges even harder to overcome: Consumers are only willing to spend a limited amount of money on streaming services, and it's not as much as you might think.
According to a new poll from The Hollywood Reporter and Morning Consult, consumers in the United States would like to pay only $17 to $27 a month for streaming services, with $21 being the sweet spot—even though many already pay $37 a month for three services, and 90% of U.S. cable subscribers pay more than $50 for cable. The survey didn't separate cord-cutters from those paying for streaming services in addition to cable, nor did it ask how much consumers would be willing to pay for live-linear services like Hulu + Live TV or DirecTV Now (er, AT&T TV Now).
But that $21 target should give all subscription video-on-demand (SVOD) services pause, as it's barely enough to cover two services per consumer, much less the three or four that investors seem to be banking on consumers paying for. It does, however, bode well for ad-supported services, both on-demand and live, like Pluto, Philo, and Tubi, as well as hybrid services like Hulu's base offering and (oh God, they've got another one) AT&T Watch.
After a couple years of testing the waters, more and more consumers I talk to are already looking at ways to reduce both the number of services they use and the amount they pay for them. Even people in the industry are talking about how there are too many services, and if you pay for everything you want you're going to spend at least as much as you would on a cable subscription. It's become so easy to simply add a service through Apple TV or Amazon Prime Channels that almost anyone who watches OTT ends up with a surfeit of services. Sooner or later, though, consumers are going to look at their bank or credit card statements and decide that enough is enough.
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