STREAMING WARS?

By: Austin Laroche
3/4/2020

With the upcoming release of NBC’s new streaming service, Peacock, America is once again seemingly asked to choose favorites in the increasingly exhausting “streaming wars.”

Typically, competition among major corporations is seen as a good thing for the American economy, as it spurs innovation, which ultimately benefits the consumer. Along those lines, few can argue with the premise that competition has completely overhauled and dramatically improved the average individual’s access to entertainment. Only two generations ago, most American households did not own televisions, and those that did were limited to some combination of PBS, Fox, ABC, NBC, and/or CBS. The first video rental store did not exist until the late 1970s (when renting a movie also required renting a VCR). Access to entertainment was again overhauled beginning when Blockbuster charged a man named Reed Hastings a $40 late fee, which annoyed him so much that he decided to start a mail-order movie rental company called Netflix.

Despite acknowledging these vast improvements to the access to entertainment, most people seem to be exhausted by the current state of the streaming wars: where every studio wants a piece of the action on the streaming market. Largely driven by the ever increasing number of “cord cutters,” other media companies, including: Disney (Disney+), Apple (Apple TV+), AT&T (HBO Max), Comcast/NBC (Peacock), and CBS (CBS All Access) are attempting to move in on the revenue stream that has largely been held by YouTube, Netflix, Hulu, and Amazon over the last decade. At first glance, it appears that these companies are all competing for the same piece of the proverbial streaming pie without the innovation that the competition is supposed to breed. If each streaming service, instead of offering new ideas or solutions, is instead merely hoarding its respective media capital and requiring a separate subscription, then the competition among these industry giants actually hurts consumers.

However, on January 16, 2020, QUARTZ published an article denying the streaming war altogether. According to executives of the major streaming companies, “there is no war. In fact, there is hardly any actual competition, since they’re each such unique offerings.” The article gives quotes or references comments by the co-head of Amazon’s TV unit, the head of Amazon Studios, Disney’s CEO, Apple’s CEO, an Apple executive who oversees Apple’s content, the Netflix board of directors, the former head of Walt Disney Studios, and the former head of strategy at Amazon Studios. Each of these leaders insist that the current streaming boom is not a competition. Instead, they claim each of the studios is sufficiently unique that they are pining for a particular niche of consumers. This begs the question as to whether these companies are simply trying to recreate past success or if there actually is no streaming war because each company is sufficiently unique. Either way, what are the likely ramifications for the market and, ultimately, the consumers?

According to the article, in terms of overall motivations behind its respective streaming platform, Netflix seems to be the only company whose sole goal is to expand its streaming empire because its sole revenue source is from its streaming platform. The other companies seem to have additional/ulterior motivations because they have additional revenue streams, which would suggest the use of slightly different strategies.

Comcast is launching Peacock with a large focus on growing and retaining Comcast TV subscribers. In maintaining its TV subscribers, Comcast will continue to benefit from its currently huge ad revenue. Disney, with large funding coming from its parks and merchandising, can use the consumer data from Disney+ to better inform its other business decisions. AT&T is using HBO Max to entice more users to sign up for cell phone plans. Amazon Video is largely an additional perk for Amazon Prime subscribers, to encourage them to maintain their current Prime subscriptions. Similarly, Apple+ will help keep users excited about purchasing new iPhones and other Apple products.

Additionally, each streaming service has employed fairly significant strategy differences in the marketing and operating of its streaming platforms:

  • Most streaming services rely predominantly on income from subscriptions, but Peacock is attempting a new three tiered system of payment: a free option that comes with limited programing; a $4.99/month option that includes full programming but has advertisements; and a $9.99/month option with full programming and no advertisements.
  • Netflix does not have advertisements from external vendors, but Peacock, Hulu, and Amazon Video occasionally do.
  • Disney+ is marketing content that is family friendly, whereas Netflix focuses on more mature media.
  • Hulu is the primary streaming platform to watch programmed tv shows immediately after they air on ABC, NBC, or Fox. This is contrasted with Peacock, which is placing a lot of its focus on providing event type programming (e.g. America’s Got Talent).
  • Netflix has been moving away from the strategy of leasing tv shows, in favor of creating original content. Taking it one step further, Apple+ relies entirely on original content and has no library of leased content. Conversely, NBC’s Peacock and CBS All Access are favoring familiar content. Peacock and CBS All Access are trying to reacquire the old “comfort food” shows that have been staples of their respective networks over the last two decades (i.e. The Office, Saved by the Bell, NCIS, and Blue Bloods). Disney has been straddling the line between the two strategies by showing longtime classics, but also creating new content that is in line with already beloved media (e.g. various shows based in the Star Wars and Marvel universes).
  • Netflix and Amazon publish an entire season of a tv series at once (a favorite of “binge watchers”). However, Disney+ releases one episode per week.
  • Some of the platforms have attempted to branch into the sports world too, including: Disney+ (by offering discounts on ESPN+), as well as Hulu and Amazon Video, which have both explored offering live sporting events to their subscribers.
  • Some services have raised prices to increase the quality of their content, while others have reduced their content to offer lower prices.


[Source: Data: Axios research; Chart: Axios Visuals; Link]

  • HBO Max is focused on amassing the largest media library of any streaming service (including sports and news), while Amazon’s library is decreasing in size but providing more movies than any of the other services.
  • Disney+ is relying largely on word of mouth for its advertising (which has been largely successful thanks in no small part to the marketing sensation that is “baby yoda”). This is in contrast with NBC’s Peacock, which scheduled its release date so that it can advertise on the satellite network during this year’s Olympics.

Are these motivational and strategical differences enough to allow each of these media giants enough of a niche market that they can all be satisfied or do the company executives know that their companies are in a bitter struggle and are simply giving lip service by denying the streaming wars? At this point, it is unclear.

If these separate niche markets do exist, it is hard to believe that they will last long. The world is becoming too interconnected, and each of these giants are spreading too much. Perhaps for the foreseeable future, each of these streaming services can be successful. However, long-term, mutual success is likely unsustainable because as the platforms expand, overlap with each other is inevitable. When this overlap occurs, each of the companies will either lose revenue or be forced to be innovative in order to remain current. Perhaps in the future, we’ll be able to use Netflix as our workout app or we can use Hulu to order a pizza.

For the time being, the current streaming war is hurting the consumers. Not only is it exhausting trying to keep each of the platforms straight (where do I have to go to watch Friends again?), but the current fragmentation of the industry likely means that people won’t have as much immediate access to watch shows as they did even five years ago (unless they are willing to pay for all the subscriptions). However, this competition will breed innovation, which will likely dramatically alter (and hopefully improve) entertainment for future generations. Who knows, maybe the fatigue of paying so many subscription fees will be the spark that begins the next wave of entertainment innovation for future generations.