Oct 09, 2019

The pressure for subscribers pits legacy media companies against tech giants and rewrites the rules of engagement in Hollywood. Here’s why that matters.

Television’s “streaming wars”—a term that’s been used for nearly a decade to characterize competition in the music and entertainment industries—will reach a critical juncture in the next few months. Apple TV+ and Disney+ will debut. NBCUniversal’s Peacock and HBO Max will likely announce monthly price points. Netflix will continue to premiere new projects from creative heavyweights like Ryan Murphy and Shonda Rhimes.

The streaming wars are similar to media battles of the past, as legacy companies fight for audience popularity, industry predominance, and to keep the threat of the disruptive interloper at-bay. But this time, traditional media companies like Comcast are competing with tech giants like Amazon for mass audiences.

Meanwhile, upstarts like Viacom’s BET+ are finding opportunity by catering to niche audiences, and ad-supported streaming platforms like Pluto TV are expanding their userbases.

For consumers, the streaming wars result in more content to choose from. By FX Networks’ count, nearly 500 scripted shows were produced in 2018, compared with 266 in 2011. Online platforms such as Netflix and Facebook Watch were the fastest-growing distributor, releasing a third of the original shows.

But what will the streaming wars mean for advertisers, marketers, distributors, and creators? We break it down for you below.

The background:

Nearly a decade ago, if consumers wanted to cut the cord and stream TV shows and movies, their options were essentially limited to one sole platform, Netflix, which introduced streaming services in 2007 and premiered its first original show House of Cards in 2013. Since then, streaming has become mainstream. It’s seen as both an alternative and a supplement to traditional cable. Netflix now has more than 151 million global subscribers. It’s growth has run in parallel to the shrinking reach of cable, leading companies like AT&T and Comcast to view it as a threat. 

The situation is complicated since some of Netflix’s most popular content, for example NBCUniversal’s Friends, is the intellectual property (IP) of legacy media companies. Why would traditional media companies sell the rights to their content to a platform that’s threatening their business model? In response, many companies—including Disney, Comcast-owned NBCUniversal, and WarnerMedia are creating their own streaming services. That way, they can benefit from their owned content through a direct-to-consumer distribution play. 

The streaming wars are also complicated because media companies today aren’t just media companies, and their interests in one sector may contradict their interests in another. Consider Amazon, which is a media company insofar as it produces original content like the Emmy-winning Fleabag. It’s also a distributor, thanks to Prime Video and Amazon Fire TV. This means, it operates as both a friend and a foe to other media companies. They’ll compete for streaming subscribers and partner to put content on its connected TV.

Key players:

Alongside Netflix, the biggest names in subscription-based streaming services (SVODs) include Amazon Prime Video, Hulu, and CBS All Access. (The latter two also have ad-based options). AT&T's WarnerMedia offers DirecTV Now, Watch TV and soon-to-be launched HBO Max. Newcomers Disney+, Apple+, and Comcast-owned NBCUniversal’s Peacock will soon be added to the mix as well, and each of them tout exclusive, and original content to lure subscribers.

Strictly ad-supported streaming services (AVOD) include Pluto TV and Tubi, alongside live streamers Sling TV and YouTube TV and smaller, niche streamers like BET+, Shudder, and Crunchyroll.

Key Players Chart

Why it matters:

It’s not entirely hyperbolic to say that the future of television depends on how the streaming wars play out. Will consumers embrace a litany of streaming services, or will they concede to subscription fatigue? Will any of the streaming platforms ever be able to match the reach and scale of cable TV? And, what will advertisers do to reach consumers in lieu of traditional television ad units?

For advertisers and marketers, the rise of streaming could encourage the growth of AVOD services, which provide a free alternative for consumers much like broadcast TV has for cable for decades. As Pluto TV CEO Tom Ryan said in a keynote conversation at Adweek’s Advanced TV Summit in September, “Because we know that subscription fatigue is setting in, people will only pay so much for subscriptions. You need the ability to actually expand your bundle for free.” And, thanks to addressable technology, AVOD has the potential to deliver advertisers high returns on their ad spend. 

Advertiser should also be happy about the competition for subscribers among the SVOD platforms, since its led to a boom in advertising. Comcast, AT&T, and Disney each plan to spend hundreds of millions advertising their platforms to consumers, though those outlays still dwarf the billions Netflix spends each year. 

In the creative production space, the streaming wars are changing Hollywood power dynamics. Conglomerates are paying top dollar to sign creative talent to multiyear, front-loaded deals, and increasing their production budgets. Netflix, Amazon and Apple reportedly spent $14 billion, $7 billion and $5 billion respectively on original programming content this year. That means more opportunities for individual talent and industry producers to fill the unlimited streaming slates. For example, Viacom produces original hit shows for third-party platforms, including 13 Reasons Why for Netflix and Catch 22 for Hulu.

It also means more revenue streams for companies with valuable library content, as the “arms race” for classic television like Friends and The Office—go-to favorites among streaming consumers—that switched hands for hundreds of millions of dollars last summer proved.

What's next:

More disruption. The fragmentation within the streaming ecosystem will have far-reaching implications, moving from the TV screens and smartphones of consumers to the balance sheets of the biggest technology and media companies today. The streaming wars will force the advertising, distribution, and creative industries to adapt to the ongoing shifts in consumer preferences and behaviors. 

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