Introduction to Information Science Professor Elaine Wenderholm

ISC 110: Introduction to Information Science

Professor Elaine Wenderholm

Final Paper

Most video streaming services operate in similar ways. You pay a monthly fee to the company, which then in-turn provides you with unlimited access to their library of video content. Most companies realize the consumers usually have the latest and greatest software/hardware, and because of this most of the video streaming services offer apps for a plethora of devices some of which include; the iPhone, iPad, Windows Surface, Android tablets, Blackberry devices, PC’s, PS4’s and Xbox’s (Barr). Netflix and Hulu start out at $7.99 per month, and Amazon Video comes included with every Prime subscription. Most of these video streaming services also produce in-house content. For instance Netflix has House Of Cards and Orange is the new Black while Amazon Video has Alpha House and Betas. These companies have found different ways to differentiate themselves from competitors in the broadcast TV industry.

In the current broadcast TV industry we have the big four, CBS, NBC, FOX and ABC. These television channels are available to anyone with a receiver or anyone that subscribes to any type of PAY-TV service such as satellite or cable. Since these are networks that broadcast using over-the-air signals that the Federal Communications Commission has allowed them to do, broadcast networks are required to fulfill a “public good.” The networks must provide engaging, entertaining and informative content, and must fulfill a public service. Traffic and weather reporting are considered public services, and it’s why most stations dedicate time to report traffic and weather. Broadcast TV viewing is generally referred to as appointment viewing. What that means is that when a person wants to watch a television show, they usually have to find out when the show is happening and get to a television set to watch the programming. Shows for broadcast television are usually created for a certain demographic and because of this, the target audience of a show changes from program to program. The average one hour television show has about 16-17 minutes of advertisements and 41 minutes of programming. With all the advertisements, shows must do well in the ratings in order for them to be considered a success. Often times, TV shows will go off-air after only a season or two, if the numbers aren’t up to network executive expectations. The broadcast TV industry is a cut-throat industry, if a show doesn’t work, a network won’t shy away from canceling it and if an on-air personality doesn’t fit the bill, the network will also be quick to remove that person. This next section of my research will analyze and compare the effects services such as Netflix, Amazon Video and Hulu Plus have had on broadcast television.

After examining both video streaming services and broadcast TV, it became evident that that video streaming services such as Netflix and Amazon Video affect broadcast television networks. Video streaming services have created a competition for the creation of in-house content, it has created a competition for subscribers, it has reignited the Net-neutrality debate and it has changed how companies deliver content. Before video streaming services, broadcast networks like CBS and FOX didn’t have to worry about what their “competitors” were doing, because the only people competing with the broadcast networks were cable companies, and back in the day, people weren’t subscribing to all those channels, they wanted the basics, like sports and their local broadcast networks. With the rapid development of high speed internet, existing broadcast networks adapted and transformed to address the needs of an always connected consumer.

Netflix, Amazon Video and Hulu Plus are miles away in terms of video and audio quality compared to the broadcast TV networks. Netflix provides Super HD with 1080p and it’s also capable of 3D and 4K/Ultimate High Definition streaming. Hulu Plus and Amazon can both play video back at 720p quality. All three services offer 5.1 Dolby Digital Surround Sound while Netflix goes the extra mile and provides 7.1 Dolby Digital Surround Sound for those with capable equipment. Compared to broadcast television, the video streaming services provide more customizable viewing options and preferences. For instance, Netflix when logging in asks you what your favorite movies, TV shows and genres are. Using these preferences, Netflix is able to better tailor their content library to the viewer offering them a more custom experience. As a consumer, I’ve found that video streaming services such as Netflix, Amazon Video and Hulu Plus offer a more tailored, customizable experience. While broadcast TV networks have tried putting content up on the web, on pages such as cbs.com and FOX.com, the content they provide is limited and it’s only available to people with active subscriptions to the services.

The biggest competition we see now-a-days between video streaming services and broadcast television would be the competition the companies are engaged in in terms of subscribers. Netflix is estimated to have 30 million subscribers in America,¹ and 38 million subscribers around the globe. With broadcast television, the big four, (CBS, NBC, ABC & FOX) are estimated to be in around 115 million households in America. While broadcast television has a far greater number to viewers than video streaming services such as Netflix, Amazon Video and Hulu Plus, it should be noted that Netflix has gone from 3% of US households with cable to over 12% over the last few years. Number like that show that while people are continuing to subscribe to the traditional PAY-TV package, it also illustrates how consumers have been able to deal with another expense, and subscribe to another video-on-demand service such as Netflix or Hulu Plus. Another statistic we should take note of is the rise in price of PAY-TV. Over the last five years PAY-TV has increased to an average of ~$90.00 which represents a 36% increase in price over the last five years.² These price cuts have made it harder for people to subscribe to traditional TV packages and because of this 22% of people who move in the United States don’t subscribe to PAY-TV service.³ Consumers have always had the ability to “speak” with their wallets and it finally looks like they are doing so. Prices have increased so much over the last few years that people that usually would consider subscribing to a traditional TV package can’t do so simply because they cannot afford it. ⁴

Aside for competing for subscribers, this renewed rivalry between video streaming services and broadcast TV has started another war in terms of content creation. When Netflix first set-up shop in 2007 it couldn’t afford to produce in-house content, because of how little revenue the company was bringing in. Any money that came into Netflix, had to go right back out to secure the rights for television programming and movies that would appear in the Netflix library (Waterman). Fast forward five years and Netflix now has a budget to product various shows, some of which have already won awards. One of Netflix’s most popular shows, House Of Cards, has won Golden Globe and Emmy Awards. In the first season, Claire Underwood won the Award for Best Actress, making her the first actress to win a Golden Globe Award for an online-only web television series. For the 2^nd season of the show, House Of Cards received 13 Primetime Emmy Award nominations, winning one for Outstanding Sound Mixing for a Comedy or Drama Series (One hour). The awards have proved how companies not associated with professional studios such as CBS and FOX can produce award winning content that is both accepted and applauded by television critics and writers (Waterman). Many people thought the Washington, D.C political drama starring Kevin Spacey was worthy of awards, but few people believed it would actually happen. Netflix was able to shock the world, and prove once again, how it’s re-inventing the entertainment industry. With Netflix producing House of Cards, the broadcast TV companies needed to find something similar to grab people’s attention away from Netflix. CBS has been producing new episodes of NCIS: New Orleans and ABC just put out a Toy-Story special titled Toy Story That Time Forgot along with new episodes of Scandal. Ever since Netflix and Amazon Video started producing their own in-house content, the networks have been on their heels trying to produce the next House of Cards. With more options than ever, both video streaming services and broadcast TV networks have to be at their best to make the next, big thing!

So far we’ve seen how video streaming services has been able to disrupt the existing marketplace. The new services have been able to produce content that rivals professional networks such as CBS and NBC, they’ve been able to siphon subscribers from cable operators, and they’ve have been able to thrive in the marketplace because of their price points. Another effect these companies have had on the broadcast TV networks has been the renewed Net-neutrality debates we’ve been having because of the bandwidth consumption of services such as Netflix, Amazon Video and Hulu Plus.

Net-neutrality is something that has been in the news as of recent, and because it is something that affects the likes of Netflix, Amazon Video and Hulu Plus, there are reasons both video streaming services and broadcast TV companies alike have their competing interests. According to dictionary.com net-neutrality is “the principle that basic Internet protocols should be non-discriminatory, esp. that content providers should get equal treatment from internet operators.” In an ideal world companies like Netflix and Hulu Plus would have no problem getting their content to consumers at home. But, because their content has to traverse the equipment of cable operators such as Comcast, Time-Warner, Verizon FIOS and Cablevision, who claim that video operators take up to much bandwidth, video quality is often degraded frustrating consumers (Sherman). Although many people would agree that net-neutrality should be protected, the cable companies have a point. With services such as Netflix and Amazon Video accounting from anywhere to 27%-33% of internet traffic in America at any time, it’s not too difficult to see why these companies are frustrated (Marshall). Video streaming services like Netflix and Hulu Plus carry a lot of the same content broadcast operators do, so it’s basically like the companies providing internet are helping consumers use products such as Netflix, which take them away from the service the cable operators want you to use such as CBS and ABC. Netflix has made arrangements with Comcast and Verizon FIOS ensuring their traffic can get in the so-called “fast lane.” People fear this could set a bad precedent affecting consumers later down the road. The net-neutrality debate is something that will be happening for some time. Until a regulatory agency such as the FCC comes down with a concrete ruling, we’ll continue to companies bend and twist the rules as they like to get whatever they may need.

Video streaming services have made a big impact in this world. What once took an hour to do (renting a movie from a video store and getting home) now take seconds from the comfort of your own home. While many people love their Netflix subscription, it should be noted that these companies have their effects. Broadcast TV providers have become more adept to the marketplace, offering shows online, creating better original programming and finding new and innovative ways to grab eye-balls. An important debate, the net-neutrality one is happening in America as well. Like many people, I’m hopeful that the FCC can regulate the Internet and keep it free and open for society. Video streaming services have certainly contributed to the downfall of broadcast TV, but with innovative thinking and fresh ideas, the new generation should find ways to blend the old system with the new one and refine it to provide consumers with the best viewing experience, while protecting the entertainment industry so many Americans have come to love.

1. 
   Barr, Trevor. "Television’s newcomers: Netflix, Apple, Google and Facebook."Telecommunications Journal of Australia 61.4 (2011).
   
2. 
   Marshall, Jacob. "Trading Rabbit Ears for Wi-Fi: Aereo, the Public Performance Right, and How Broadcasters Want to Control the Business of Internet TV."Vand. J. Ent. & Tech. L. 16 (2014): 909-945.
   
3. 
   Sherman, Ryland, David Waterman, and Yongwoog Jeon. "The Future of Online Video: An Economic and Policy Perspective."
   
4. 
   Waterman, David, Ryland Sherman, and Sung Wook Ji. "The economics of online television: Revenue models, aggregation, and'TV Everywhere'."Aggregation, and'TV Everywhere'(April 1, 2012) (2012).