Following the lead of premium cable and satellite channels, on-demand streamers, and a company that will sell you almost anything, DirecTV is adding an original program to their exclusive Audience Network channel. Anyone observing the broadcasting landscape knows how important original content is to premium and streaming providers, but is DirecTV future-proofing itself against a time when consumers skip the service altogether and go straight to content?
As a gateway service, DirecTV trails only Comcast in number of subscribers. After seeing defections when the recession of 2008 cut household budgets, DirecTV has seen consistent growth and currently has over 20 million customers and remains a go-to in terms of digital programming, as well as offering exclusive services such as NFL Sunday Ticket. Satellite also has a higher customer service ranking than the two leading cable companies, Comcast and Time Warner Cable, both of which are ranked among the least liked companies in the country. Cable has also seen an average rate hike of 5.8 percent in the last year.
DirecTV and it’s number one competitor, Dish Network, have also raised fees. Dish had added $5 to all bills and DirecTV has seen an increase of 3.8 percent, lower than most cable companies but still the latest in a steady rise for a number of years.
As of now, cable and satellite are the only options consumers have had to access premium channels such as HBO, Showtime and Starz. These are incredibly valuable resources for DirecTV, and have only gotten more valuable with the explosion of high-quality original content. The increasing value may explain why DirecTV may be future-proofing itself, creating original content to stay a viable service.
The rise of Netflix, Hulu and Amazon has become a wildcard for providers. Streaming directly to consumers, the services work around the gateway. When Netflix was only a through-the-mail service they were barely on the providers’ radar, especially after the company almost grounded itself with bad public relations. Streaming has worked , but original content is where Netflix caused the most disruption of the industry. House of Cards and Orange is the New Black were both expensive experiments but have been wildly successful with subscribers and critics. and Amazon is following Netflix’s lead by approving six new shows that will only be accessible through its Amazon Prime service.
DirecTV’s problem is a future where consumers can go directly to the content they want. If sports channels especially any featuring college and NFL football decide they are better off going directly to their audience, satellite and cable are in trouble. If channels providing highly rated original programs like AMC, FX, or USA want out, satellite and cable are in trouble. If HBO and company decide to go at it alone, forget it. satellite and cable will be wrecked. These scenarios are unlikely, but because the content providers know they have growing power they can charge more and satellite and cable will have to increase their prices, pushing more people into alternative solutions.
Many industry observers think both cable and satellite models will become unsustainable, and soon. Regular cost increases will eventually take its toll on consumers. Other options are coming, companies like Apple, Google and Sony working on what is called over-the-top services that promise live TV streamed over the internet. Consumers also keep asking for choose-your-own options, meaning instead of buying an entire block of hundreds of channels they can pick and choose only what they want, a nightmare for satellite and cable as well as much of their content providers.
Providing their own original content is one way DirecTV can remain relevant, and possibly a critical one. The rapid pace of technological change makes the future of television uncertain. Consumers have greater choice in how they watch, what they watch, and when they want to watch it. New ways to access content through Netflix, Amazon, Roku, and Apple TV provide even more proof DirecTV is going to have to change. Providing original content nobody else has might be a solution.
Commentary by Andrew Elfenbein
Follow Andrew on Twitter @andyelf