The Dawn of the Streaming Era: From DVD Mailers to Binge-Watching Sprees
This is part one of a three-part series on the evolution of the SVOD/streaming market. In this first part, we’ll look at the dawn of streaming and its transition from physical to digital dominance. In part two, we’ll explore the impact of the streaming wars on the media landscape and how they’ve changed the way people consume content. Finally, in part three, we’ll tackle the question of “Where do we go from here?”, highlighting some of the key trends we’re seeing in the SVOD/streaming market today and how we think these might change over the next few years. Let’s dive in!
Setting the scene.
Ever notice how the word ‘streaming’ is ubiquitous nowadays? There was a time when ‘stream’ was reserved for babbling brooks and weekend fishing. Now, we’re knee-deep in streaming services, and not a single trout in sight. The digital age brought about a profound shift in the ways we consume media. Gone are the days when our entertainment choices were confined to the DVDs on our shelves. Today, streaming is not just an option; it’s the predominant way many of us consume content. Let’s explore this evolution!
The New Kid(s) On The Block.
Ah, 1997. The year Titanic sailed onto the big screen and the Spice Girls told us what they really, really wanted. 1997 also marked the inception of Netflix, not as the streaming giant we know today, but as a DVD-by-mail service. It’s intriguing to think about the beginnings of a company that would later revolutionize the entertainment industry.
While it was by no means an “overnight” success, by 2007, Netflix had impressively shipped its billionth DVD and garnered a base of +7 million subscribers. However, its true disruption began when it ventured into streaming in 2007. By the end of 2010, the platform’s subscriber count had increased to ~20 million(!)
The Perfect Storm.
Before diving further, perhaps it’s worth briefly discussing the ingredients that gave way to this shift from physical to digital dominance. In many ways, Netflix’s successful pivot from DVDs to streaming was largely facilitated by broadband penetration.
The unbundling of information from infrastructure, driven by the internet and digitization, dramatically reduced the cost of distributing information goods (in this case video), allowing players like Netflix (and eventually others) to rival traditional players. Where Comcast, and others, needed to spend billions on hybrid-fiber infrastructure and DirectTV had to build uplink facilities and launch satellites, Netflix didn’t have to do either and could simply leverage existing infrastructure to drive disruptive innovation in Pay TV.
At the same time, the emergence & adoption of smartphones/tablets together with several other tech advancements, such as improvements in compression algorithms — like the H.264 codec, which allowed for better streaming quality with fewer data requirements — enhanced the viewer experience on platforms like Netflix and further drove a shift in consumer viewing behaviors. Consumers started to prioritize convenience and accessibility, looking beyond traditional cable. Finally, the increasing costs associated with postage and the physical delivery of DVDs made the streaming model a more economically attractive & viable option.
The Onset of Competition.
With the undeniable success of Netflix’s model, other industry players quickly recognized the potential of streaming and began launching their own platforms. Hulu launched in 2008 with a slightly different approach, focusing on offering current-season TV episodes, and positioning itself as the “go-to” for more recent content.
“Every greenfield market eventually becomes competitive.” — Michael Porter
On the other hand, Amazon leveraged its vast e-commerce user base and introduced video to its Prime subscribers by 2010. With the dual allure of expedited shipping and entertainment in one package, Amazon Prime Video quickly began to challenge Netflix and Hulu for streaming market share.
The Fragmentation Begins.
As the 2010s progressed, studios took note of the lucrative streaming model. They realized that instead of leasing their content, they could launch their own platforms. By the early 2010s, studios began pulling their content from shared platforms, sparking the dawn of exclusive content. Remember the collective heartbreak when Disney titles started disappearing from Netflix? Yep, it wasn’t long before the Mouse House began signaling its intentions to enter the streaming space, which it eventually did with Disney+.
At the same time, streaming platforms like HBO Now also entered the scene, offering exclusive access to a range of high-quality content from their own studios from ‘The Sopranos’ to ‘Game of Thrones.’ This expansion of platforms meant more choices for consumers but also heralded the beginning of a fragmented streaming market.
By 2015, there were an estimated 88 million streaming video subscriptions worldwide. By 2022, that number had grown to >1.1bn(!) subscriptions. This growth was largely driven by several factors, including the convenience and (initial) affordability of streaming platforms, as well as the variety of high-quality content that they offer. Today, streaming platforms are more popular than traditional TV networks in many countries — e.g., in the United States, more people now watch streaming video than they do live TV. But that’s a tale for another day…
It’s a Wrap!
The transformation from DVDs to digital streaming has been nothing short of remarkable. From eagerly awaiting the mailman’s delivery of our next movie to being overwhelmed by the sheer volume of content available at our fingertips. As we transitioned from a nearly monopolistic market to an era of streaming by the dozen, one thing was certain: the war for our screens was just heating up. In the second part of this 3-part series, we will deep-dive into The Peak of The Streaming Wars, so stay tuned!
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