Why Brands Like HBO and WWE Are Flocking to Streaming Subscription Services

TV viewers are slowly ditching cable

People want to watch what they want, when they want it. - Credit by Photo Illustration: Dianna McDougall; Sources: WWE, HBO, iStock
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In the history of TV—all 75 years of it—there has never been a time when so much content has been so readily available to watch.

But with the average cable package now topping $103, according to Leichtman Research Group, and a new wave of direct-to-consumer services, viewers have more choices than ever in how they watch, via over-the-top, or OTT, services.

“The key advantage to launching a stand-alone service is growing their audience beyond the traditional pay-TV ecosystem,” said Glenn Hower, a senior media analyst at the Dallas-based research firm Parks Associates.

About 82 percent of TV households nationwide subscribe to some form of pay-TV service, according to Leichtman. That’s down 5 percent from 2011. As consumer behavior changed, and the technology got better, TV programmers took notice and started going over the top.

CBS All Access was one of the first to launch in October 2014. It now has almost 1.5 million subscribers paying $5.99 a month for CBS shows as well as exclusive programs like The Good Fight and the upcoming Star Trek. HBO Now was the first premium direct-to-consumer service. It launched in April 2015 and now has more than 2 million subscribers paying $14.99 per month.

You can catch The Good Fight on CBS All Access.

And while those platforms serve a wide audience, the new trend is niche.

This month, Turner launched Boomerang, an ad-free streaming service that comes with access to thousands of hours of cartoons including the entire Hanna-Barbera, Looney Tunes and MGM libraries.

Another streaming player, WWE Network, is built for fans of professional wrestling.

“Back in 2012 and 2013, we started doing research among our fans, and we found out pretty quickly that WWE fans were consuming a lot of digital content online, about five times the national average,” WWE chief revenue and marketing officer Michelle Wilson told Adweek. “So while we were originally going down the path of launching a linear TV network, when we saw this data the light bulb went off for us and we felt this was an opportunity for us to go direct to our consumers.”

WWE only ranks behind Netflix, Amazon Prime, Hulu and MLB.TV in total paid subscribers, according to a 2016 report from Parks Associates. Showtime is No. 9 and CBS All Access is No. 10 in total subscribers, per that same report.

“We like calculated risks and we were willing to take the risk for the revenue upside and for the opportunity to drive more engagement,” said Wilson. “We felt streaming provided the greatest long-term transformative growth for WWE on a global basis.”

The three-year-old WWE Network, which can be viewed with services like Roku and Apple TV, now has nearly 2 million paid and free trial subscribers across the globe. The service is $9.99 a month.

While the standalone streaming model has been a hit for WWE, not every company sees the need to go over the top, whether on its own or with the new streaming bundles from the likes of AT&T’s DirecTV Now, Dish’s Sling and Google’s YouTube, as well as offerings from Hulu and PlayStation Vue.

Bob Bakish, CEO of Viacom, which includes networks like Nickelodeon, Comedy Central, MTV and the soon-to-launch Paramount Network, says signing on with a streaming service may increase viewers, but won’t always make economic sense.

“If you think about all these guys that have launched they’re all essentially the same,” said Bakish. “What I mean by that is they’re all about 40 bucks. They’re all based on broadcast and sports. And if you talk to the CEOs of any of them, they’ll tell you the same thing, which is we can’t make any money, which is probably code for we’re losing money on a variable basis.”

Viacom channels are currently available on DirecTV Now and Sling.

The trends are moving to the subscription video-on-demand [SVOD] industry, says Parks Associates’ Hower.

Spending on transactional video, including physical media purchases and rentals, VOD rentals and pay-per-view, is down, while average spending on subscription internet video is up “from under $4 per month in 2012 to about $8 per month at the end of last year.”

“The industry is still in a state of trial and error with focuses on generating market share, experimenting with business models and establishing market differentiators,” said Hower.

“It’s early days,” adds Bakish. “It’s certainly part of the category’s development.  If you think about the impact of OTT more broadly, outside the U.S. you can make a clear argument that it’s going to continue to drive growth and penetration in pay TV, albeit in an evolving way.”

@ajkatztv aj.katz@adweek.com A.J. Katz is the senior editor of Adweek's TVNewser.