Eric Plaag and Matt Smith

Amazon, HBO, & Netflix: Streaming Deals Mean Nothing to Television’s Fate

In Industry, Television on April 26, 2014 at 9:08 am

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by Matt Smith

This week saw a pretty exciting announcement from HBO and Amazon about a new licensing deal struck between the two companies. Amazon Prime has been granted exclusive streaming rights to HBO content, though there are a few major caveats, particularly that the deal is limited to HBO’s older content, with new series only becoming available after three years have passed since a season’s airing. Additionally, as has been pointed out, the press release carried precious few details about the financial aspect of the deal, and also the fact that the real payoff comes when HBOGo becomes available via Amazon’s set-top box Fire! some time later, again reinforcing the likelihood that HBO will reap the bigger benefit from potential subscribers here.

Predictably, the news caused the internet to go into a complete meltdown, reiterating a lot of what we’ve been hearing for the past decade (and longer, if we are talking about the death of “TV,” whatever that is). Netflix is in danger! TV is dying! Cable will eventually be overrun by streaming content and the internet! These broadcast doomsday prophecies may not pan out exactly as those shouting that “Winter is coming!” into the heavens might think, however.

What is problematic about these assertions in light of the Amazon/HBO deal is that they don’t take account of a few very prescient facts: first, television viewership is being tracked using outdated models unable to keep up with changes in broadcast and viewership practices; second, both net neutrality’s fate and Google’s plans to roll out GoogleFiber will both have more of a direct impact on the outcome of how we watch content; and, third, and perhaps primarily, Netflix and other streaming services have very little interest in losing television networks.

To the first point, while there have been numerous reports in the past couple of years – especially considering Netflix’s ever-growing subscriber base – proclaiming that TV viewership is down, even Nielsen concedes that it’s probably not doing that great a job at tracking who’s watching what. Furthermore, whenever they have begun analyzing new methods of viewer tracking, like taking a look at Twitter and DVR views, they have come up with very interesting results. In fact, if we take a further look, overall TV viewership is waaaay up.

To the second point, the death of cable TV is likely going to be tied to either the death of net neutrality, or the success of GoogleFiber. If people will be cutting the cord, it will be because they are either getting worse service because companies like Netflix don’t want to or can’t (eventually) function in a “pay for play” environment in which their rates constantly go up due to cable providers’ whims, or because they’re getting a better service from another company that doesn’t come with all of the baggage major cable companies come with.

And finally, streaming services don’t want to see TV die because they’re so dependent on them for content. The reason Netflix and Prime have seen growth is their access to seasons of shows already available. If they were to lose that content and rely solely on shows developed in-house, they would lose the huge influx of streaming series they rely upon each year to boost their subscriber bases. The influx of original content seems to actually be serving as a ratings bumper during lulls in TV networks’ seasonality and major events which will likely see quarterly streaming interrupted. In fact, Netflix has continued to grow and operate like a TV network itself, and is even launching as a network via cable television providers very soon. And it’s clearly not worried about the threat of Amazon, with CEO Reed Hastings repeatedly having downplayed the competition between not only the two streaming services, but HBO as well. In any case, as far as Netflix is concerned, the major indication from its current market strategy is that future growth for the company lies not in new content itself, but in global expansion.

Overall, however, the biggest thing that undercuts the potential impact of the Amazon/HBO deal is that HBO has no interest in cutting the cord itself, and despite reports which have shown that overall premium channel subscribers are down, HBO, Showtime, and STARZ all lambasted the data, and the study was quickly taken down as each network claims significant growth. And as far as the HBO side of the arrangement goes, HBO is reticent in its feelings toward eventually severing its own ties to cable, particularly as it doesn’t see the potential for standalone subscribers to its HBO Go app. And finally, HBO sees shared passwords for Go and even pirated episodes of the wildly popular Game of Thrones (still millions of viewers below other networks, even giant cable series The Walking Dead) as promotions for the network to gain new subscribers.

What all of this adds up to in the scheme of how big an impact Amazon’s streaming deal with HBO will affect the fate of cable television is: not very much. As HBO continues its onslaught with hit shows, and as Netflix continues to primarily position itself as another TV network, albeit one which operates solely through broadband streaming, the death of TV still seems a long way off. And as far as Amazon is concerned, its continued push toward original programming is possibly only a way of furthering its data mining operation, which sees it profit off of being able to tell publishers, clothing companies, and various other distributors and manufacturers exactly what its customers want to buy and what they’re willing to pay for it. Then, it will simply use your own streaming against you, as it already has and continues to do with every other commodity you can buy on the site.

 

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