Stealing The Stream

The move away from Pay-TV seems threatening to major networks. The one thing we have not looked into in depth is the streaming side revenue. Sure, a lot of consumers may consider moving away from their traditional Pay-TV service, but they'll have to gain a viable stream. Companies like Netflix and Hulu survive the same way Pay-TV service survives, subscriptions. A recent article from business2community.com showed  that some people are looking to steal streaming services instead of paying for them.

This could be the single biggest reason as to why streaming services won't be able to overtake Pay-TV. Around 2000 and 2001, DirecTV had to crack down on pirating because the card inserts they used in their satellite box units were able to be pirated. Unlocking this signal allowed users to unlock every single channel on DirecTV. A similar situation is facing streaming services right now. From my own personal experience, I can't even count how many different people are using my Netflix account right now. The cost to me is about $8/month so I'm not incredibly concerned with how many other people are using my account. Most of the other users on my account are family, and sometimes I've signed into a friends' device or Xbox 360 and forgot to sign off. To this point, these services haven't been able to restrict multiple users and devices from accessing. Technology is making this type of theft more difficult to police. DirecTV knew that there was one box that corresponded with one code. My understanding of this is that every now and again, DirecTV would refresh the codes and a pirated card could not keep up. Eventually, this technology was replaced by more sophisticated DirecTV boxes and they cracked down.

With streaming services, it's difficult to know the number of different devices that users are using. For example, it becomes unreasonable to try and have a user register her PlayStation 3, Xbox 360, iPhone, iPad, MacBook, Apple TV, and iMac to her Netflix account. That becomes very cumbersome for a consumer and a very discouraging provision for a user looking to switch from Pay-TV to a streaming service. They may be able to stop two devices from streaming the same Netflix account at the same time, but people are able to access this type of service in a multitude of ways, and I think it will be an uphill battle to combat this type of consumption.

So far, it has not hurt Netflix specifically, but other companies like Hulu and Aereo may not have felt the full impact because they are in the growth phase of their user base. Either way, a lack of enforcement is hurting the maximization of profit for these companies. It will be up to them to not only take market share away from Pay-TV, but properly monetize the new business. For now, Pay-TV is still going strong. Here is an informative clip summarizing the current state of Pay-TV versus streaming services.

Shawn

Sources: http://www.business2community.com/social-media/cord-cutting-nyt-on-how-it-could-create-new-social-opportunities-0461168

http://news.slashdot.org/story/01/01/25/1343218/directvs-secret-war-on-hackers