As someone who has spent decades in the entertainment industry and witnessed the birth of streaming services, I can confidently say that the so-called “Streaming Wars” are far from over. Ted Sarandos might roll his eyes when people claim Netflix as the undisputed winner, but he should be more concerned about the Streaming Four: Netflix, YouTube, Disney, and Amazon.
It’s likely that each time someone claims “The streaming wars have ended – Netflix has won,” Ted Sarandos might express skepticism. While the praise is complimentary, it doesn’t necessarily contribute to progress. Interestingly, in July, Netflix asserted themselves as the foremost leaders in direct-to-consumer entertainment alongside YouTube, according to financial analysts.
YouTube and Netflix both vie for viewer time, money from consumers, and now advertising revenue. Both generate similar amounts of income and profit, but their methods of delivering streaming content differ significantly, each utilizing distinct advantages.
The competition among streaming services is expanding across various arenas. By utilizing Streamonomics, we can identify which strategic tools are best for each conflict. However, to gain a more comprehensive understanding, we should at least consider Disney and Amazon as well. Although they entered later, meaning they’re still growing into the economic landscape of the leading two platforms, both possess unique strengths that other competitors find difficult to emulate. Together with Netflix and YouTube, they make up what I refer to as the Streaming Quartet.
The most challenging aspect to duplicate lies in the Primacy Effect: Netflix frequently serves as the initial choice for “What shall I watch?” Due to its advanced algorithm, vast amounts of data, and an ever-evolving library of engaging content, Netflix often secures that crucial decision-making moment for hundreds of millions of viewers worldwide.
Although they might not initially appeal to everyone, they excel at maintaining viewer interest for extended periods. Netflix has consistently broadened their content offerings, moving from licensed content to original premieres, multiple languages, unscripted shows, and now live programming. When they mention “we’re not dogmatic about…”, it usually indicates an upcoming strategic move on their part.
YouTube: The Urgency Advantage
Approximately 2.5 billion individuals tune into YouTube every month, with around 80% of them doing so daily, spending considerable time on the platform. This strength is built upon four key foundations: (1) a hybrid “freemium” structure (2) strategic support for desktops, mobiles, and TVs (3) versatile format options ranging from brief shorts to full-length films (4) a creator-focused model that minimizes creative risk and amplifies the product’s relevance.
When it comes to deciding what to watch, Netflix is frequently the initial choice, but YouTube is regularly a close second – or even the primary option for some. Moreover, YouTube is commonly the first destination for gaming videos, highlights, clips, tutorials, and video podcasts.
YouTube stands alone in its unique category, functioning as an open stage where newly-created videos by anyone are instantly accessible, fostering a strong sense of immediacy. On the other hand, platforms that carefully select content typically require more time to bridge the gap between creation and discovery.
Nevertheless, the boundaries are becoming increasingly indistinct. While YouTube has ceased producing original TV series, it hasn’t shied away from spending approximately $2 billion annually to acquire the NFL Sunday Ticket game franchise, catering to hardcore and affluent football spectators. Shows initially aired on YouTube, such as “Cobra Kai”, have subsequently thrived on Netflix. Moreover, YouTube has recently unveiled an update that enhances creators’ ability to showcase serialized content, suggesting that the frontlines in this competition will continue to shift.
Disney: The Creative Advantage
Disney boasts the most influential collection of media brands worldwide, with Disney, Marvel, Pixar, FX being just a few examples from their extensive roster. They also possess an unmatched library of long-running English television series, such as “Grey’s Anatomy” and “Family Guy,” which are challenging to replicate at this scale. To top it off, they own ESPN, the leading sports brand, and Hulu, one of the most popular destination brands.
It’s no accident that Disney holds eight out of the top ten highest-grossing films ever made, with five of those releases happening within the past five years. Similarly, it’s not a fluke that they won 60 Emmys recently. Apart from Netflix, Disney is the streaming service generating the most revenue for a company, and after YouTube, they have the second-highest advertising income. They’ve only just started making profits from streaming, but this is before the full impact of Disney+/Hulu integration, technological advancements, and price increases takes effect.
Amazon: The Marketplace Advantage
Amazon Prime Video functions not only as a streaming platform but also serves as the world’s largest video store. Besides offering Amazon Originals and licensed content to Prime members, it operates as a retailer for over 100 channels (including Max and Crunchyroll), FAST channels, and stands out as the leading provider of transactional TV on demand. Moreover, it holds exclusive rights to popular sports events such as NFL matches, with plans to expand into NBA events soon.
On various platforms, it’s highly probable that you’ll locate a title; more often than not, it will be found on Amazon. It might be included as part of your subscription offerings, or it may be purchasable separately.
By enabling ads automatically on Prime Video, they’ve achieved the broadest global ad exposure among streaming platforms on televisions. Moreover, this decision boosts spending across Amazon, transforming it into a powerful marketing tool for its massive $500 billion consumer market, which is poised to achieve profitability independently. Given Amazon’s extensive data on advertising, their significant share in TV manufacturing, and ownership of Amazon MGM Studios, it’s clear that their self-reinforcing cycle (or flywheel) will enable them to continually expand their control over crucial content rights.
Wait, Isn’t The Grass Greener Elsewhere?
Instead of elaborating on the numerous advantages of various competitors such as Apple, Comcast, Paramount, WBD, and several more in this discussion, I’ll save that analysis for a future article.
In contrast to traditional wars that conclude, the ongoing contest known as the “Streaming Wars” offers a wealth of content. Unlike wars, however, competition in this realm is continuous and never-ending. As consumer preferences shift, each skirmish calls for unique strategies. Those who grasp Streamonomics – the economics of streaming – are likely to create lasting value, regardless if they are part of the Big Four streamers or if they compete with, collaborate with, sell to, or invest in any combination of these giants.
Hernan Lopez is the founder of management consulting company Owl & Co.
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2024-09-26 18:20