The cost to access content the way you want is on the rise—that is, if you’re the type of person who’s willing to pay for it.
Last week, Google-owned (GOOGL) YouTube announced a new streaming-video service called YouTube Red. The service, which will launch on Wednesday, provides ad-free access to the streaming-video platform for $9.99 per month. The subscription also includes access to YouTube’s recently launched Gaming app and an upcoming YouTube Music app. Starting next year, YouTube Red subscribers will get exclusive access to original content from the content provider.
The announcement, which had been rumored for months, came alongside the end of the initial three-month trial of Apple (AAPL) Music. Apple’s streaming service was available to all subscribers for free for a period of three months. Now, though, the company’s streaming-music offering will start charging subscribers $9.99 per month or $14.99 per family.
Apple and YouTube are by no means alone. Spotify, Amazon (AMZN), Pandora (P), and countless other companies all offer streaming music subscriptions. On the video side, companies ranging from Hulu to HBO to Showtime all offer paid services. Depending on the platform, users are getting ad-free content or simply the ability to access whatever it is the provider is peddling. In many cases, those services cost around $10 per month for access—a seeming deal.
The issue, however, is that the costs can very easily pile up. An entertainment-loving consumer, for instance, may dole out large amounts of cash to get his or her hand on content. If Netflix costs $9 per month, but the person also wants TV programming from Hulu and music streaming from Apple, they’re paying what amounts to a tank of gas each month for relatively little content. If Amazon’s wildly popular series Transparent catches his or her eye and the person happens to be a fan of professional wrestling and wants access to WWE (WWE) content, the costs go up again. And now that YouTube is dangling an ad-free service that would be complemented with original programming, it’s well within the realm of possibility that this theoretical consumer is paying $50 to $100 per month for all of the services he or she desires.
For the most part, however, IHS analyst Dan Cryan says consumers are just fine with those costs. In fact, his research suggests that consumers don’t generally feel that streaming services are slowly infiltrating their wallets.
“This is not something that is being widely felt at the moment,” he says.
Meanwhile, content providers are expected to rake in the cash. In June, Parks Associates released a study that found video-streaming services in the U.S. Will see revenue jump from $9 billion in 2014 to $19 billion in 2019. The company reported that 57% of households with cable or satellite service have at least one streaming subscription. That number, Parks argues, will grow as time goes on.
Also in June, research firm eMarkter reported that 49% of Americans have at least one streaming-video subscription. Netflix, the most popular of video-streaming providers, reported in July that it now has 42 million subscribers in the U.S. In the second quarter of 2013, it had nearly 29 million.
Nailing down exactly how much someone pays for streaming services is tricky, Cryan says. Those who only want a service or two may actually find themselves saving money. Those who are trying to “cut the cord,” or get away from pay-TV subscriptions but still have all the content they want, may ultimately fall victim to the streaming trap.
“If your needs are served by Netflix and you don’t feel the need to a traditional pay-TV subscription then streaming can provide real savings,” Cryan says. “Where things become more complicated is when you start to add more subscriptions.”
Cutting the cord—at least in the U.S.—is starting to become more popular. In March, Experian Marketing said that 7.3% of U.S. Households had totally eliminated their reliance upon cable or satellite and opted for streaming services. In 2010, that figure stood at 4.2%. Whether those people are ultimately saving money depends on their content desires, Cryan says. But at an average price of $10 for both video and music streaming, it doesn’t take long to get back to where they were with cable or satellite providers.
In Sept., the Leichtman Research Group reported that the average American cable bill is $99.10, up 39% compared to five years ago. Cord-cutters who watch Netflix and Hulu for their television needs, HBO and Showtime for their original programming, and want to sidestep YouTube for its ads, are about halfway to that price. Sprinkle in some other services here and there and the cost-savings of streaming start to wane. And let’s not forget that this only the beginning—companies like NBC, CBS, and other major networks have all found ways to break out their content from cable and satellite companies. Selective viewing, in other words, is coming into vogue. And it may not be as cheap as some thought.
“Despite the popularity of subscription-based streaming, the new wave of [streaming] services raises questions about how much consumers might be willing to spend on these services,” eMarketer analysts wrote in a statement in June. “Already, a set of [streaming] subscriptions to a handful of offerings could approach or exceed the price of a cable or satellite TV package. That scenario would eliminate cost savings as an incentive for consumers to cut the cord.”
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