Streaming Wars: The Battle for Attention
Netflix’s dominance in the streaming industry is unquestionable. By the end of 2018, the streaming service had around 139 million paying subscribers and the number has only risen in the first half of 2019. As streaming videos became more widespread over the past several years, Netflix’s stock has soared. In the last 5 years alone, the stock has gone up roughly 450 per cent and 8,000+ per cent over the past decade.
For a relatively long period, Netflix virtually monopolised the streaming market, facing no real threat to its business model. By disrupting traditional cable TV, Netflix brought in millions of customers who now had the option to watch what they wanted, when they wanted, at a fraction of the cost.
While media companies were focused on creating content, Netflix focused on leasing rights to the same shows and movies that the media companies produced. For a small fee, Netflix bagged the rights to air some of the most popular movies, such as the Marvel Cinematic Universe and hit TV shows, including Friends and The Office. However, Netflix later started creating its own original content, becoming the largest producer of TV content in the US in 2018.
Netflix Dominance Shrinking
However, this blue ocean is soon to turn into a red one. The same companies that played a role in Netflix’s rise to the top are now coming to contest that same crown. As online streaming grows more and more popular by the day, some of the biggest media in the world creating content finally seem to have had an epiphany: “What if we start our own streaming service?”
Taking a look at the Big 3
Mickey Mouse is probably the first image that comes to mind when you think of Disney. However, some of the biggest blockbusters on the planet are owned by Disney. Walt Disney owns Marvel and the Star Wars franchises. Under its subsidiary Pixar, Disney has produced some of the most successful animated feature films ever. Avengers: Endgame, Captain Marvel, Incredibles 2, The Last Jedi, and Beauty and the Beast are some of the highest-grossing movies in the last three years, and they are all owned by Disney.
While many of the widely popular Disney titles are currently on Netflix, they will be removed as soon as Disney’s streaming service, Disney+, is launched in the second half of 2019.
Another player on the block is AT&T, which is set to launch its own streaming service in 2020. AT&T’s acquisition of WarnerMedia in 2018 turned the telecommunications company into the media powerhouse it is today. WarnerMedia owns HBO which has produced some of the biggest hits in television history, including Game of Thrones, The Sopranos and Sex in The City.
And while the service is set to launch next year, shots have been fired already. WarnerMedia announced earlier this week that the insanely popular 90s sitcom, Friends will be removed from Netflix and exclusive rights will be given to HBO Max, its own streaming service when it debuts in 2020.
Comcast’s NBC Universal
The Office is the most-watched show on Netflix. Who owns The Office? NBC Universal, another media colossus that aims to enter the direct-to-consumer streaming space. And lo and behold, the most-watched show on Netflix will be taken off for good by the end of next year as NBC Universal sets to launch its own streaming service in 2020.
What does this mean for the future of Netflix and the future of streaming?
From a user point of view, so far, Netflix has offered a very rich content experience. However, moving forward, if so many other media companies start integrating a streaming service into their business model, viewership will most definitely be split among different streaming services, unless users shell out more money for membership in each of these platforms.
More than half of the top 50 shows streamed on Netflix are owned by other entertainment companies. This, no doubt, puts Netflix in a very difficult predicament. And Netflix realises it better than anyone, which is why the company has been spending huge sums to grow its own content library. Netflix spent $12 billion in 2018 to produce and procure content and expects to spend another $15 billion in 2019 to equip itself against the competition. The turf war is only just heating up. Earlier this month, Netflix snatched the rights for the feature film, Red Notice, starring Dwayne Johnson and Gal Gadot, from Universal. Netflix now invests more capital in content than any other American TV network and its skyrocketing debts are a clear indication of the company’s efforts to borrow money to produce these shows.
However, even with such huge spending, Netflix cannot hope to compete against Disney or AT&T, as they each possess a war chest of content that dates back decades. It is all but certain that Netflix will lose its dominance in the streaming service industry after Disney and AT&T enter during the next year. However, Netflix’s 150 million+ strong user base may prove to be advantageous, especially if you consider the fact that retaining a paid customer is far more economical than attracting a new one. This should allow them to focus more of their resources on content generation. Going forward, Netflix’s success will largely rely on the content it produces.
Streaming services are only as large and relevant as the content they distribute. Thus far, bigger media companies seemed content to lease content to Netflix. However, as they realise the opportunity cost of not having their own streaming service, they will find themselves in the unusual position of potentially disrupting the space they helped Netflix build.
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