The Peak of the Streaming Wars: Binge-Worthy Budgets and an All-Out Entertainment Brawl
This is part two of a three-part series on the evolution of the SVOD/streaming market. In our last post, we left our hero, Netflix, armed with algorithms and an all-you-can-eat buffet of shows, lounging comfortably on the iron throne of streams. But, as Netflix turned prime time into “my time,” the rest of the industry took notes and new challengers approached the castle gates. As we delve deeper into our series, and the developments that followed the years between 2018–2022, our plot thickens, the cast expands, and the budgets? Well, they inflate faster than a balloon at the Macy’s Thanksgiving Day Parade. Enjoy!
The Streaming…What?
Remember when choosing what to watch was as simple as flipping channels? Cue nostalgia. Today, we’re strategizing our binge sessions like chess grandmasters plot moves — except here, every piece is a drama, sitcom, or another true-crime docuseries.
The term “streaming wars” is believed to have been coined by Richard Greenfield, a media analyst at BTIG Research, back in 2018 to describe the increasing competition he was seeing between media companies to launch their own streaming services.
As the calendar pages flipped to 2018, the entertainment industry found itself on the cusp of an intense battle. The term “streaming wars” began to echo through the corridors of Hollywood and Silicon Valley alike, a catchy moniker that encapsulated the impending clash of media (and tech) titans vying for the throne of viewers’ screens. It was during this period that the worlds of traditional TV and digital media collided, with major players like Netflix, Amazon, and newcomers, Apple and Disney+, amassing content arsenals and subscriber armies.
Content Isn’t Everything, It’s The Only Thing.
The advancements in technology, and subsequent decoupling of information and infrastructure, dramatically reduced the cost of distributing video content online, effectively lowering the barriers to entry for new streaming participants. With barriers to entry falling, content became king, queen, and court jester.
To wean viewers off traditional cable and network television, streaming services had to offer something compelling. Investing in a wide range of high-quality content was the way to go, offering not just an alternative but a superior choice, providing everything from original content to docuseries, to “fan-favorite” licensed shows. In a crowded SVOD market, content became the key differentiator to attract & retain subscribers.
For example — a 2019 survey by PwC showed that, on average, there is a high correlation between the perceived overall value of a streaming service and the perceived value of its content. While consumers also heavily favored things such as ease/reliability of use, original and licensed content became the battleground (and table stakes) for most players.
Big Players Make Big Moves.
This fierce competition for subscribers and SVOD dominance drove massive content spending over the following years, leading to a record spend of $216bn(!) in 2022.
A big part of this gold rush for content was largely driven by the entry of some media/tech heavyweights into the streaming market, including the likes of Disney, Apple, and HBO.
- Disney’s Magic Kingdom of Content: As we highlighted in our previous post, in the early 2010s, major studios began pulling their content from shared platforms such as Netflix. Disney was one of the first to do so when, in 2017, it announced that it would be ending its distribution deal with Netflix and launching its own streaming service. Fast forward to 2019 and, by leveraging the power of the Force and some Disney fairy dust, Disney was able to finally launch its highly anticipated Disney+ streaming service. When Disney+ launched, it didn’t just dip its toes into the streaming pool — it made a splash with a robust library that tapped into the nostalgia vein with Disney classics, coupled with exclusive, high-profile content like “The Mandalorian.” Within two years, by 2021, the service amassed over 100 million subscribers, a milestone that took Netflix a decade to reach.
- Apple’s Orchestrated Entry: Apple TV+, while a latecomer to the party, didn’t hold back on funding high-quality and star-studded originals like “The Morning Show,” drawing audiences through its ecosystem integration. By mid-2021, reports suggested Apple TV+ had amassed over 40 million subscribers. While it’s worth noting that initially many of Apple’s subscribers came through promotions bundled with their own devices, the company’s focus on high-quality, polished content quickly drew a global audience to the platform, reaching over 100 countries, as well as numerous awards for its original content, including 25 Primetime Emmy Awards and 12 Critics’ Choice Awards for shows like Ted Lasso and Severance. As Apple CEO, Tim Cook, emphasized…
“It’s not about volume but rather about quality.” — Tim Cook
- HBO Max’s Theatrical Flex: Finally, let’s not forget about HBO Max, which crashed the party by offering a comprehensive catalog that included new theatrical releases simultaneously on the platform. Similar to Disney, HBO was able to leverage AT&T’s Warner Media assets (I remember working on that merger! Now spun-off, whomp whom), which included content from Warner Bros., DC, CNN, TNT, TruTV, etc., to launch its service in May 2020 with a library of over 10,000 hours of content. This effectively allowed HBO to offer a wider range of content than most other streaming services from the start — addressing the common “cold start” problem. Together with that, HBO Max quickly became known for the quality (and production costs) of its original content, with hits such as “Game of Thrones,” “Succession,” and “Euphoria”, as well as original movies, such as “Dune” and “Elvis.” A recent post on Reddit ranking “The Best TV Shows of All Time”, based on ratings by well-known sources like IMDb, Rotten Tomatoes, Metacritic, etc. shows 5 HBO shows in the top 10. While there’s certainly some recency bias in the chart, this focus on high-quality, original content can also be seen in the traction of the platform, which drove subscriptions to an impressive 44 million by early 2021.
This all came to a peak when in 2022, in an effort to win/defend market share, Netflix, Amazon, Disney, and Warner Bros. alone spent approx. $77bn(!) on content alone. Netflix spent ~$17bn (more than any other streaming service) and Disney spent an eyewatering $33bn on both streaming and theatrical content. While the tide is starting to turn on content spending, as profitability has started to come into focus for a lot of these players/services (more on that in our next post), we can probably expect SVOD platforms to continue spending heavily on content while content remains king. It’s an expensive ticket to the game, but it’s the price of competition.
“Wooooorldstar.”
As the battle for content was heating up, the next battleground after content quickly became the international arena. For streaming giants, global expansion was not just a growth strategy but a necessity to sustain their massive content spend.
- Local Content Production: Successful global platforms began investing in local content production, creating shows and films that resonated with local cultures, languages, and interests. The upside came when some of this localized content began finding global audiences, with Netflix’s “Money Heist” from Spain and “Squid Games” from South Korea being prime examples of that, or films like “Parasite” and “The Farewell”, which have won major awards at international film festivals.
- Cultural Export: Inversely, these platforms also acted as cultural export mechanisms, introducing domestic audiences to international content. This cross-pollination not only diversified the viewing experience but also uncovered new revenue streams for these platforms through specialized/local content that found broader appeal globally.
- Scaling Infrastructure: However, this global expansion also demanded scaling infrastructure, including content delivery networks (CDNs) and data centers, to ensure high-quality streaming experiences worldwide. Similar to the investment into content, this was a significant expense, but it was necessary to meet the expectations of a global audience.
Davids Among Goliaths.
While high content spend by media/tech Goliaths created a barrier to entry for new platforms (you can’t just walk into the Colosseum of streaming without a strong roster of gladiators — i.e., a solid lineup of shows and movies), the major streamers’ focus went to targeting more of a “mass” audience which, in turn, created an opportunity for specialty SVOD platforms, targeting “niche” content, to emerge and corner other (attractive) parts of the market. A recent report by Antenna showed that Specialty SVOD services have quietly grown at a +37% CAGR for the past four years, significantly higher than Premium SVOD’s (already impressive) 21% CAGR.
At the end of 2019, Antenna counted 10 million subscriptions to Specialty SVOD services, or 7% of the Premium + Specialty SVOD total. By June 2023, that number had grown to 28 million, or 11% of the total. This trend suggests a burgeoning space for specialty content amidst the streaming service’s broader audience shift. Services like Crunchyroll, Shudder, BET+, Mubi, and others began to recognize that the streaming wars couldn’t be won on breadth alone — depth in specific genres or interests could carve out sustainable subscriber bases.
- Targeted Content Libraries: Unlike giants trying to be everything to everyone, specialized platforms like Crunchyroll and Shudder focused on curated content for specific audiences — anime and horror aficionados, respectively. This specialization fostered loyal communities around their content.
- Engagement Over Volume: For specialized platforms, success metrics might not hinge on sheer subscriber volume but on deep engagement and subscription longevity within their target audience. These platforms often boast highly dedicated viewers who value the specialized content they can’t find elsewhere.
- Brand & Positioning: The fostering of community often drives passionate fanbases to become brand ambassadors, a powerful marketing tool. Together with that, instead of competing directly with the major services, these specialized platforms have historically positioned themselves as complementary services — e.g., a consumer might subscribe to Netflix for its variety and Crunchyroll for its exclusive anime collection.
With Great Choice, Comes Great Responsibility?
By investing in this three-pronged approach of breadth (mass content) depth (specialized content) and reach (global expansion), streaming services have built vast kingdoms that cater to a wide array of viewer preferences and demographics. This has been a defining tactic in the ongoing streaming wars, but with great choice also comes great…fatigue? For the paradox of choice has become a double-edged sword for consumers in this battle for eyeballs.
Choice is great until your streaming subscriptions outnumber your close friends. A recent Deloitte study said it all: the average U.S. Joe and Jane now spend, on average, $48 per month for SVOD services (juggling ~4 different subscriptions), with about half of them agreeing that they “pay too much” for SVOD services and about one-third said they intend to reduce their number of entertainment subscriptions.
Navigating the labyrinth of platforms to find a specific show or movie can be a frustrating experience, and the cost of multiple streaming subscriptions can quickly add up. This sentiment has led SVOD platforms to experience historic levels of churn over the last year. After all, it’s all fun and games until your credit card bill reads like a TV guide. The increase in subscriber fatigue and belt-tightening has led to a rise in cancellations across all platforms, with survey data indicating “cost” as the primary reason for this churn.
Also, out of those respondents, less than 3% indicated wanting to switch to another paid streaming platform, further highlighting the trend toward subscription consolidation among consumers.
These shifts in demand (or lack thereof) may herald a new era where adaptability and innovation are not just virtues but necessities for survival.
So, Where to Now?
As we wrap up this chapter of the streaming saga, it’s clear that the battle lines in the streaming wars have historically been drawn with big budgets and even bigger ambitions, driving major players’ desire to chase subscribers and growth at all costs, by marrying a strategy of premium content with broader audience appeal. However, as the wide OTT industry comes under intense (macro) pressure and streaming platforms are increasingly focused on profitability, we may be witnessing a shift in gears and business strategies. Could this be the end of the streaming wars? And, if so, where does SVOD entertainment go next?
Looking ahead, the question ‘Where do we go from here?’ looms large. In our next installment, we’ll dive into the latest trends that are currently reshaping the streaming landscape to try to best answer this question — think ad-supported tiers softening the blow of subscription overload, the potential comeback of live shows capturing the buzz of shared experiences, and the exciting prospects of interactive and immersive content. These developments are more than just the next plot twists; they’re the transformative forces that will shape the industry’s direction.
That’s a Wrap!
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