By Dan Moren
June 4, 2015 6:54 AM PT
Showtime’s streaming service doesn’t “undercut” HBO’s
Note: This story has not been updated for several years.
I’m seeing a lot of stories with a headline like this one at The Verge, arguing that Showtime’s announcement of a $11/month streaming service “undercuts” HBO Now, which is priced at $15/month.1
On the surface of it, it’s understandable that folks are going to position these as a competitive situation where one is offering a cheaper product than another, but this is media. Those rules don’t apply here, because this market isn’t a zero-sum game.
Yes, Showtime will cost you $4 less every month, but you’re getting a completely different product. Because unlike, say, the consumer tech market, where most consumers buy only a single smartphone, for example, most TV watchers follow more than a single program. Regardless of their respective merits, Ray Donovan is not Game of Thrones. True Detective is not Homeland. If you want to watch Silicon Valley, signing up for Showtime isn’t going to help you.
In the end, it doesn’t really matter if Showtime’s service is cheaper. Customers don’t simply gravitate towards the cheaper option in this market; you go to who has the shows you want to watch.
As to why Showtime is so much cheaper, well, its shows may have improved vastly in quality in the past few years, but HBO remains the gold standard for original programming in the pay-TV market. It charges a heavier price because it can.
Showtime, meanwhile, has a few goals here. For one, it wants to entice customers who haven’t been attracted to pay-TV in the past; for another, it’s in Showtime’s interests to charge a lower price to appeal to consumers who may want both Showtime and HBO. Together, the two cost $26 per month, still less than what you’d generally pay for cable service with premium channels.
That said, I do think this is another sign of the volatile period we’re entering. Because where HBO and Showtime go, plenty of other networks are going to follow. AMC, FX, USA, TNT–all of them are probably going to want a piece of the subscription pie.2
In some ways, this new streaming channel model doesn’t much improve on the existing cable system. Yes, it’s great not to have to pay for the channels you don’t want to watch, but even so, most people don’t watch every series on a single network, which means that you still end up paying for a lot of shows you’re not going to watch. And the more of those standalone services you subscribe to, the more you pay. All on top of your existing Internet bill–which may even be higher if you drop the cable portion of your bundle.
Even with all of these standalone subscription services, you’re still paying for bundles, in effect. Just bundles of shows rather than bundles of channels. The balance of power may be shifting towards the networks instead of the cable companies, but it’s still not in the hands of the consumers.
[Dan Moren is the East Coast Bureau Chief of Six Colors. You can find him on Twitter at @dmoren or reach him by email at email@example.com. The latest novel in his Galactic Cold War series of sci-fi space adventures, The Nova Incident, is available now.]
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