Yahoo Finance Why Are Pay-TV Distributors Going ‘Over the Top’?
Netflix and the Competitive Landscape: Key Update
Over-the-top services from pay-TV operators
In April, Dish Network (DISH) launched a new multi-stream version of Sling TV priced at $20 per month. It includes channels from Twenty-First Century Fox (FOXA) but excludes programming from The Walt Disney Company’s (DIS) ESPN and ABC channels.
AT&T’s (T) DirecTV is also set to launch three over-the-top services this year. Comcast (CMCSA) has also launched its own IP-based service called Stream.
Netflix (NFLX) referred to these services from pay-TV operators and stated that these services are confined to the United States. Meanwhile, Netflix is focusing more on its content and global expansion. The company further stated, “So the only inhibitor in our growth is how great is our service. Can we make it so there’s never buffering so it always starts up instantly. So the recommendations are incredible, and that the content is exciting. And if we can do all that, we’ll continue to grow globally even though HBO orDish or others are also growing. So their growth doesn’t take away from us.”
Price fueling the cord-cutting
Price has become the most important factor for Millennials cutting the cord on pay-TV and moving to over-the-top services—even more important than content. Cord cutting is when users cancel their pay-TV subscriptions in favor of online streaming service providers.
According to Digitalsmiths’ video trend report for 4Q15, about 60% of survey respondents pay more than $100 per month to their pay-TV provider. The chart above shows that about 24% of users pay more than $150 per month. However, over-the-top services launched by pay-TV operators offer cheaper options than Netflix.
Netflix makes up 0.24% of the SPDR S&P 500 (SPY) ETF.
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