The “Streaming Wars” will dramatically escalate in late 2019 and early 2020, with the launch of Disney+, HBO Max, and Apple TV+ into the competition for consumer eyeballs and wallets.
But there’s a narrative that needs to be challenged. It goes something like this: SVOD is a zero-sum game, where a subscription to one SVOD service represents a subscription lost to another.
In this narrative, a Disney+ that scales up significantly in subscribers and viewing hours means a significant displacement of subscribers and viewing hours from Netflix.
Let’s address this narrative below with the following 4 points.
When consumer value is differentiated, it means that a business can offer goods or services that are unique and not offered by its competitors. When consumer value is dispersed, it means that those highly differentiated goods or services are fragmented across various businesses. This is the reality of premium video, where content and IP are long-term assets, not commodities, and no two video services will offer the same slate of content and IP. CBS is the default for Star Trek fans, HBO is where you go for Game of Thrones, and Netflix will be your destination for Stranger Things. …
In this article, we will:
The ultimate goal of this article is to help you understand why Netflix will continue to succeed in growing towards the sky, despite the launch or expansion of other streaming services, and why those other streaming services can also succeed alongside Netflix. …
In an industry where “nobody knows anything” when predicting hits or flops, is it better to make a few giant bets, like focusing on a handful of mega-franchises, or a lot of smaller bets, like producing hundreds of low-to-medium budget originals? With the record-shattering performance of Disney’s Avengers: Endgame, everyone seems to want to emulate the mega-franchise business model of the Mouse House.
In this article, I’ll go over:
The number of U.S households without pay-TV increased from 14 million (13% of U.S) in 2010 to 26 million (21% of U.S) in 2018. Even more worrying, the average hours that consumers spend on pay-TV each day has fallen dramatically from 2013 to 2018, as shown on the chart below. The fall is particularly severe for the younger demographics (decreases of 59% and 56% for ages 12–17 and 18–24 respectively), who represent the future of video consumption. The conclusion here is as sobering as it is inescapable: traditional pay-TV is steadily losing its relevance in people’s lives.
Here are some basic truths about traditional…
Background: At Netflix, over 90% of the cost of a piece of content is usually amortized within 4 years of its launch date, in order to reflect how viewership is heavily concentrated in the period immediately after release, followed by a steep drop-off as the months go on.
What is amortization? Simply put, it’s how the cost of a piece of content is spread out across its lifespan. I’ll use an example — let’s say Apple, which is set to launch its own streaming service, spends $10 million with a studio to produce an original series that’ll rest exclusively on its service for 24 months. One way to amortize the content is to simply spread out the $10 million evenly across the 24 months, which means a Cost of Revenue of $417K per month on the income statement, against whatever is the Gross Revenue in those same months. This is called “straight-line” amortization. …