Why viewers choose video-streaming and how to make that decision yourself
Posted August 23, 2016
Like thousands of other consumers, Matthew Blevins cut the cable four years ago and took the plunge into streaming his television entertainment.
“I love not having commercials. I love being able to choose what I watch, when I watch it and pause it whenever I like,” the 45-year-old IT professional in Chantilly, Virginia, said.
Blevins is part of a growing audience of video-streaming users — 50 percent of TV households in the first quarter of 2016 had access to a paid service such as Netflix, Hulu, AppleTV or Amazon Prime, according to a report from Nielsen.
And after tasting the perks of streaming, Blevins has no interest in going back to cable.
"I find it unwatchable now," he said.
History of streaming
Dan Rayburn, a streaming expert who's been in the industry since the early days with a live-casting web company, said the streaming industry didn’t first take off until about 1998. Some of the “first stuff” started around ’94 and ’95 with audio-only streaming, while video pioneer YouTube and others contributed to streaming's development.
The industry progressed to low-quality video streaming by 1997 and grew to be mainstream from 1998 until 2002 — as his blog noted on the history of streaming, streaming really burst onto the scene in 1999 with Victoria Secret's live webcast of its annual fashion show.
Alex Zambelli, a streaming expert who worked for Microsoft in the past and now works at iStreamPlanet, said that in the days of dial-up, connections were too slow for streaming and connection speeds were the biggest obstacle for the technology to work adequately. More advanced connections through cable modems and fiber optics, along with the advent of compressed video and audio, provided the means for streaming to thrive.
A lot of the companies involved with streaming went under during the dot-com crash at the turn of the century, Rayburn said. The industry retreated for a few years until video-streaming caught on as a tool for business, military and government use and streaming experienced a resurgence, he continued.
“It really became, truly, a global communications tool,” Rayburn said.
The first real “entertainment” application in streaming’s revival was news webcasts, Rayburn said. Netflix is credited with a lot of video-streaming’s revival in entertainment, but sports programming, YouTube and the online music industry all played roles in streaming's growing popularity, he said.
So with web users able to watch videos on demand as they were "streamed" by the late 2000s, a second generation of streaming had arrived and has carried through to today, Zambelli said.
Who's streaming, who isn't
Nielsen data indicate that streaming's strongest demographic is younger generations.
Generation Z (ages 15 to 20) and millennials (ages 21 to 34) are the heaviest users of streaming services worldwide, with 31 percent of respondents from each group stating they pay an online service for content, according to Nielsen. The demand declines with the older generations, with 24 percent of generation X (ages 35 to 49) and 15 percent of baby boomers (ages 50 to 64) paying for online content.
And that trend is likely to continue as Nielsen reported 40 percent of generation Z and 38 percent of millennial respondents who have cable or satellite services were interested in canceling for an online-only service.
Zambelli contends that convenience is the main reason streaming has caught on.
“We don’t have to go to a store, we don’t have to go order something online and wait for it to be delivered,” Zambelli said.
The number of choices that became available was also a key factor to streaming’s popularity, Rayburn added. Netflix has original programs such as "Daredevil" and "Orange is the New Black," while Hulu has "Seinfeld" reruns and its own original content such as "The Path," and Amazon Prime has exclusive rights to stream "Downton Abbey."
Video streaming is going to become “more and more dominant,” as a platform, Zambelli said, as it grows beyond movies and TV shows and into technologies such as virtual reality. And as it becomes more mainstream, even more content will become available, he said.
The cost of subscribing to a streaming service may also be a factor to some of its popularity as well, especially when compared to a cable or satellite subscription.
“I currently subscribe to Netflix, Hulu Plus and HBO Now, because even the combination of all three services is cheaper than cable and I can access most of the shows I want to see,” Selena Beckman-Harned, a 32-year-old marketing manager in Carrboro, North Carolina, said.
A 2014 federal study found that a "basic" cable bill was $64 a month, with a DirecTV monthly bill coming to $100. In comparison, the most popular streaming services at less than $10 a month. They usually require a high-speed internet connection and may require a device like Roku, AppleTV, Google Chromecast or a gaming console to work.
What to choose
When considering which streaming service to sign up for, the first thing a consumer should look at are the movies and other programming a service provides — prices are comparable enough that content should be the main deciding factor, Rayburn said.
The second consideration on the devices you want to use, ranging from a smartphone or tablet to a traditional television monitor.
Look also at how the subscription works, Rayburn said, if it’s “all-you-can-eat” style or a “pay-per-download” style.
As every service has different content available — some provide access to live programming and sports, while others do not — so some consumers may find it worthwhile to pay for more than one service, Rayburn noted. For most live and local programming, some level of cable service is often necessary or in some locations an antennae can suffice.
"Consumers really like variety, and no one service really has it all," Rayburn said.
It's when a viewer thinks of subscribing to more than one streaming service that price becomes a factor. A college student with a limited budget may only be able to afford one service, but a working professional who’s replacing his cable service with streaming might consider multiple providers.
John Ranta, a 64-year-old teacher in Hancock, New Hampshire, subscribes to three services — Hulu, Amazon Prime and Google Play — rather than pay for cable service or own a DVD player.
“We do this to watch a wide range of TV and movies, when we want to watch them,” Ranta said.
With so much competition and the limitation that purchased content is only watchable on one platform, some consumers who buy streamed movies may worry about what might happen if a company and its platform shuts down, taking customers' purchases with them.
But Rayburn said big companies such as Amazon and Apple aren’t going away anytime soon, Rayburn said. And a new owner would likely want to find a way to keep the customers of an acquired streaming service, he added.
Zambelli noted there may be a risk to purchased content from smaller services and having it go under, but a larger one like Amazon is low-risk.
The future of streaming
While streaming appears here to stay. Still, traditional forms of physical media don’t seem to be going extinct either.
It is estimated that from June 30, 2015, to June 30, 2016, about 75 percent of U.S. Amazon customers bought DVDs or Blu-ray disks, while 25 percent streamed video purchases or rentals (with most purchased rather than rented), Michael Levin of Consumer Intelligence Research Partners said in an email.
The heydays of DVDs won’t come again, but they will still be in demand for a core group of consumers, Rayburn said.
“Physical copies still make a lot of sense for certain people,” Rayburn said. Such as collectors or people who want the best quality available. Quality is really the key to physical copies, he said, with “video freaks” who’ll want the best quality that comes with a high-definition Blu-ray.
Streaming can't deliver the quality of a disc, which can store huge amounts of data that streaming couldn't accommodate.
“One doesn’t necessarily replace another,” Rayburn said. “One complements the other.”
Zambelli, however, predicts streaming may one day catch up to Blu-ray’s quality as connection speeds increase. Some services have already surpassed DVD quality with high-definition streaming, he said.
And while physical copies tend to have the advantage of extra features such as deleted scenes and commentaries (with some exceptions), Zambelli said streaming’s overall exclusion of these features isn’t an issue of technological limitations, rather services are trying to get as much video titles available rather than focusing on packages with features. It’s a lot simpler for content providers to simply upload the movie.
But Zambelli did agree that physical copies were unlikely to go anywhere as a backstop when an internet connection is not available for online streaming, Zambelli said.
And in some cases, buying a physical copy may be cheaper than the streaming option, depending on its age, Zambelli noted. Much of physical media is already thought of “as outdated and therefore somehow cheaper,” Zambelli said.
Hugh Henry, a 70-year-old retiree in San Antonio said he chose DVDs over a video-streaming service for the price. While he once subscribed to Hulu, he dropped it because he felt there were too many commercials for a paid service.
“I prefer DVDs — fewer commercials and cheaper,” he said.
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