Streaming Services: High Costs of High Quality

Do video service subscribers care as much about the fidelity of the programs they watch on any given screen as they do about the clearly coveted convenience that streaming services deliver? Netflix appears to think they do.

Although it’s clear that Netflix (and its streaming-service brethren) has nailed the convenience part of the equation, it is looking for ways to deliver the best picture and audio quality it can over the difficult conditions presented by the internet. There are two recent developments pointing to greater attention to high quality output. The first is Netflix’s current limited experiment of trying out a new premium service tier, dubbed Ultra, that is being tested in parts of Europe. Ultra makes Ultra High Definition (UHD) content with High Dynamic Range (HDR) available by adding a new pricing tier that equals to about $17 per month (about a 20% increase over the Premium tier).

Higher fidelity (for the most part) requires more bits and more dollars. If Netflix only added HDR to 2K content, it probably wouldn’t add much additional network load per program, but it’s not clear how Netflix’s policy on HDR will ultimately shake out. If selling an “ultra premium” tier, let’s assume that it will have to also include 4K and Wide Color Gamut (WCG) to satisfy consumers that they are receiving truly premium quality.

Netflix increased its U.S. prices in October, so creating an Ultra tier is a way to better isolate the highest fidelity content into a tier for subscribers willing to pay for the additional production and distribution costs. Charging for greater fidelity isn’t different from how pay TV broadcasters operate. The main difference is that broadcasters can deliver high-fidelity live action programming (sports), which streamers haven’t figured out how to do yet. In fact, fast motion is not kind to streaming service providers, and Netflix is working with TV manufacturers to calibrate TVs so that they display video in the best “Netflix light.”

A recent unveiling of Sony’s latest flagship “Master Series” TVs featured a function that allows calibration of video settings that can more “finely tune” the picture in accordance with viewing environments. One of those includes a new “Netflix calibrated mode,” which adjusts settings so the content appears “the way in which it was intended by Sony engineers and Netflix-content producers.” Included in that is an apparent “turning off” of the motion processing that is there to enhance the viewing of live sports programming, but can sometimes give other programming (movies and TV programs) an undesired visual effect. Collaboration with TV makers (especially for high-end sets) is another way in which Netflix can increase the picture quality of its service.

As the streaming service leader, Netflix’s focus will likely impact other big players like Amazon to put a greater focus on high fidelity. Perhaps convenience is no longer the “end all and be all” now that the streaming service providers have scratched that itch for us. But, of course, everyone likes better quality. It’s just a matter of whether we’ll pay for it.