During CBS' earnings call yesterday, CBS CEO Les Moonves reported that "CBSN" - a streaming service launched in 2014 - had exceeded the firm's expectations. He went one step further and suggested that the company would launch a streaming service for Showtime in 2015. Of course, HBO announced a streaming service several months ago, but they indicated that the price would be equivalent to what customers pay when subscribing to HBO through their cable company. Could Showtime move more aggressively and undercut the price available through the cable providers? If so, it would represent the boldest step yet to undermine the cable bundle.
The big question still remains: What will Disney do? They own a huge amount of content that is very attractive to consumers - all the Disney-related children's programming plus all the ESPN-related sports programming plus the ABC-related news and entertainment products. If Disney follows Showtime and HBO, then cable providers will begin to feel a great deal of pressure. Of course, the key question will still be: When will someone offer streaming at a price BELOW the fees paid through the cable providers? Each firm, of course, wants to be careful not to "kill the golden goose" i.e. to cannibalize their own profitable business in partnership with cable providers. However, at some point, the market will tip. The opportunity available from "cord-cutters" will be attractive enough to convince some firms to move more aggressively. Which firm will act like Apple did when it launched the iPad and the iPhone? In those cases, Apple was willing to eat its own lunch rather than allow a rival to eat it (i.e. the iPhone cannibalized the iPod and the iPad cannibalized laptop sales). Most firms in a wide range of industries resist cannibalization, and for that reason, are often late with regard to reacting to disruptive innovations. Will entertainment companies be different in this case?