It is evidently clear – the future of entertainment is online. Typically, technology-fueled behavioral trajectories begin in developed economies [they are always invented therein], and then ripple to developing ones. The penetration latency is always less than half a dozen years for most consumer categories. So, the report from Deloitte that for the first time, more people pay for online streaming service than subscribe to traditional pay TV, in U.S., is a big deal. From the report, 69% of consumers pay for Internet video versus 65% for cable or satellite TV. In total, 43% of all U.S. consumers do the combo – subscribe to both pay TV and Internet video. People who pay for online video typically subscribe to three streaming services, based on Fortune summary.
Cord cutting, or people dropping their cable or satellite TV in favor of online video alternatives like Netflix, has reached a critical milestone. For the first time, more people pay for a streaming service than subscribe to traditional pay TV, a new survey has found.
Sixty-nine percent of consumers pay for Internet video versus 65% for cable or satellite television, according to consulting firm Deloitte, which published the report on Tuesday. The proportion of people paying for Internet video has skyrocketed while the proportion on traditional pay TV has dipped in recent years. Just 10% of consumers streamed in 2009, rising to 55% last year. Pay TV subscriptions hovered above 75% for years, but Deloitte said they changed how the question was asked since last year’s survey.
As this inflection point arrives in key DStv African markets, it will have to do real battle to thrive. Do not expect it to be easy because the winner in this game will be a company that delivers the best product at the lowest possible cost. Yes, scale matters and winner-takes-all applies here. So, Netflix is a major threat in the horizon and that is why DStv is making noise and weeping when necessary for help from regulators in Africa. Of course, DStv is also transitioning online because it knows that when broadband price drops, most will receive their entertainment needs via the web.
The problem MultiChoice is facing today with the loss of subscribers is not really about Netflix. Simply, MultiChoice knew that the trajectory of entertainment was moving online and will continue to do so. Online is going to become the equilibrium state of “view entertainment”. Yet, MultiChoice did nothing. It is typical; I called it the monopoly hangover when I wrote about Interswitch. These entities are making so much money in the present model to creatively destroy it. Typically, someone else has to do it for them as that is the only way they can wake up.
For the incumbents like DSTv, the major challenge at the beginning of potential disruption of their business usually hovers between ignorance and defiance, especially when the current model is bringing huge revenue.
The old mantra of “when isn’t broke, don’t fix” has remained engrained in their mentalities, so the inertia is real. It has now become clear that in the era of knowledge economy you can actually begin fixing, before it breaks; because these days business models don’t just break, they collapse!
DSTv has big advantage over Netflix in terms of winning markets across Africa on streaming services, just by leveraging on its customer base and transitioning them ‘seamlessly’, but it requires a lot of spending and willingness to fix what may not be technically broken at the moment.
What brought you success in the past may not be enough to guarantee your relevance going forward, herein lies the real hangover.