It’s not a zero-sum game for Apple TV+, Netflix, and Disney+

Everyone’s Wrong About the Streaming Wars

It’s not a zero-sum game for Apple TV+, Netflix, and Disney+

Image: Mike Raab

The so-called “streaming wars” heated up once again this week, with AT&T announcing more details about HBO Max, Apple TV+ launching on Friday, and Disney’s marketing blitz kicking into high gear for the November 12th launch of Disney+. For months now, journalists, industry insiders, and consumers have opined on who will “win” the streaming wars and why. What’s missing from most of these thought pieces is what will happen to all the streaming services that don’t “win”?

Here’s the thing: media isn’t a zero-sum or winner-take-all market. While they’re all competing for consumer attention (and dollars), the success of one subscription service does not mean inevitable failure for the rest. At an eventual steady state, some networks will, of course, have more subscribers than others — just as linear channels, whether broadcast or cable, have always had different levels of viewership.

Think about it. Does the fact that there were four broadcast networks mean that one of them eventually prevailed, and the others disappeared? No. Was there a cable channel war resulting in one dominant cable network? No. Multiple entrants competing on the same turf and terms could survive. Of course, some have more viewers or more popular content at any given time, and some do indeed eventually disappear, but the competition with one another wasn’t the true existential threat for broadcast or cable. It was new technologies and consumer behaviors.

Now, streaming services will only be able to monetize the consumers that find their content good enough to pay for directly.

We’re simply in a new phase of video competition, one that’s been unlocked by technology and a critical mass of consumer behavior, which is transforming the business models of media companies. Instead of wholesaling TV networks to cable and satellite distributors, content companies are bringing distribution, streaming technology, billing infrastructure, and customer acquisition in-house. The difference between the streaming future and cable bundle past is the importance of the consumer. Historically, networks were paid licensing fees by cable and satellite distributors for each of their subscribers, whether or not they watched a particular network. Now, streaming services will only be able to monetize the consumers that find their content good enough to pay for directly.

There are trade-offs. While streamers can charge higher prices to end-consumers than cable and satellite distributors (or choose to subsidize growth with promotions and partnerships), some are forgoing the advertising revenue stream that linear networks benefit from, while all entrants face increased costs due to the technology infrastructure, competitive content costs, and marketing expenses.

Faced with this shift, the streaming players have each stockpiled the greatest television shows and movies of all-time and spent vast sums to hire the most prolific and talented creators currently in the industry to create high-profile, high-budget, high-buzz content. To be honest, it’s still a pretty good proposition from a historical perspective.

Chart: Mike Raab

The average cable bill in 2007, the year Netflix launched “Watch Instantly,” was $66 per month. That same year, about 97 million U.S. households subscribed to Pay TV. Keep in mind, having cable TV at the time primarily meant access to live programming — not the bonus of deep, on-demand catalogs of the most popular content ever made. Netflix undoubtedly spoiled (and delighted!) consumers by aggregating some of the most popular content at a fraction of the price of cable, but unfortunately those days are coming to an end.

Twelve years after Netflix streaming launched, even as media companies have disaggregated their content from the cable bundle, consumers could individually subscribe to HBO Max, Netflix, Hulu (without ads), Amazon Prime Video, Disney+, Peacock, and Apple TV+, without any of their free trials or promotions, for about the same price as cable in 2007 — with a hell of a lot more content, all on-demand, and an increased investment in new high-quality programming.

Simply put, there is no reason that every major streaming service won’t succeed, which makes the question of “who will win the streaming wars?” a silly one. It’s not as though media companies will revert to traditional linear distribution channels if they don’t “win” the streaming war by having the most subscribers. It’s clear that on-demand streaming is the future that consumers prefer. The challenge now is how to make streaming a profitable business at an eventual steady state. Media companies aren’t going to cede the biggest growth distribution channel for shrinking ones. Streaming is here to stay for the major media companies, one way or another.

Of course, they’ll adjust pricing, catalog, content investment levels, revenue streams, and marketing spend until they find a profitable critical mass that satisfies both consumers and Wall Street.

While it doesn’t really matter who will win the streaming wars versus just survive them, there will be losers — most likely those that don’t have relative scale (Starz), have unclear content strategies (Hulu), or those who use content as a loss-leader for their other business units and may eventually decide that rising content costs means the ROI isn’t high enough (Amazon? Apple?).

The next five years will be a fascinating rollercoaster of datecdotes, subscriber number announcements, and increased content investment from all of the major streaming services, old and new. There won’t, however, be a singular “winner” of the streaming wars. Frankly, all of the major players have put together pretty compelling consumer propositions. While the user experience of switching between apps will be a frustrating one, it’s only a matter of time until there’s an eventual re-bundling of streaming networks. Until then — which streaming services will you subscribe to?

from Hacker News https://ift.tt/37PIPcD