The cord-cutter’s dream of paying less for entertainment content is already on the rocks. Early analyst warnings about the reality of subscription saturation have filtered through to the mainstream, with a Mashable article titled ‘There are officially too many damn video streaming services’ reaching the front page of reddit. In it, Mashable’s Senior Tech Correspondent Raymond Wong argues that while Disney’s annual $69.99 fee is probably worth it for access to Disney’s vast stock of content from Marvel, Pixar, Fox etc., the arrival of yet another challenger to Netflix’s streaming dominance may ultimately be bad for the consumer.
Between Netflix, Hulu, Disney+, Amazon Video, CBS All Access, the upcoming Apple TV+ and any number of other services, it’s easy to see why. Each has exclusive content across a wide variety of genres, so in theory each at least have one or two shows of interest to most audiences. It’s the ice cream stall dilemma on a larger scale: A huge amount of choice, but actually picking one feels more like denying yourself access to every other service.
How much is too much?
So, to get access to all those films and shows would require a number of subscriptions, the total cost of which will run into the hundreds of dollars per month. Small wonder that redditors pushed the Mashable article to the front page; the promise of cheaper, unbundled OTT entertainment is now in doubt. Subscription saturation is already here, and there will be casualties. Even Netflix has already borne the brunt of Disney’s entrance into the space, having lost as much as $8 billion off its market cap in the aftermath of the announcement.
To compound the problem, it’s highly unlikely that the number of streaming services has capped out. For media companies with huge back catalogues of film and television shows, it is far better to own the distribution system, audience data, and direct revenue. So, expect more efforts like The Criterion Channel to launch. Meanwhile, to differentiate themselves from the giants like Netflix and Amazon, smaller streaming platforms like Shudder are making a play for niche audiences clustered around a particular genre.
Standalone value
However, while people are more habituated to pay for entertainment content than digital news, there is still a finite amount of subscription revenue out there. More than any consideration, the exclusive content available on a streaming service will be a deciding factor for audiences. That does not mean, however, that the broadest range of films and shows will necessarily win out.
The lure of a new show is what typically attracts subscribers to a streaming service in the first place. CBS All Access made the exclusivity of shows like Star Trek: Discovery the tentpole of its marketing. It even went so far as to commission some short episodes between the first and second seasons to convince subscribers who might have been tempted elsewhere to remain with them.
Similarly the announcement of Apple TV+ notably contained no information about pricing. However, it did showcase the triple-A nature of its commissioned shows and movies, with names like Steven Spielberg, J.J. Abrams, Oprah Winfrey, Jennifer Aniston, and Kumail Nanjiani already on board.
Originals approach
Netflix, wary of the media companies whose content is has licensed until now pulling their content, is also heavily investing in originals. It is reportedly spending $15 billion in 2019 on content, with a commensurate increase in its marketing budget so that everybody knows about it. Analysts expect a close to $3 billion marketing budget this year. It is obvious, then, that the range of content each platform has is currently seen as the differentiating factor for the bigger players in the space.
(This issue is muddied slightly by content considerations, with some US ‘exclusives’ being carried by competitors internationally as with Star Trek: Discovery appearing on Netflix elsewhere, and the requirement for streaming services to create a proportion of their content domestically when they enter a market like France.)
As mentioned earlier, however, there are some services that are making their niche nature the selling point to consumers, trading less mass-market appeal for a more targeted approach to exclusives. Horror-based service Shudder (owned and operated by AMC) has both negotiated the exclusive rights to certain horror movies and commissioned original content, while DC Comics’ VOD service (currently only available within the US) offers access to shows based around popular characters from the comics.
These services, with lower price points, are wisely trying to avoid the crush at the top by offering services that are additive to the larger services rather than in direct competition.
However, as the field becomes more crowded, it is unlikely that content alone will be the sole deciding factor for audiences looking to optimise their subscription spending.
Here, then are three criteria that might help determine which of the current services will be among those counted as ‘winners’:
User experience
Much has already been written about the discovery and recommendation options offered by Netflix, Amazon Video, and their ilk. Between the wealth of user data to which they have access and some smart people at the helm, those services have made user experience as smooth and effective as is possible. In April 2017, UX expert Justin Ramedia wrote:
“Netflix, through an easy-to-use interface, showed us how simple watching entertainment through the internet could be. They used strategic partnerships with Nintendo, Xbox, Roku, Amazon and more to ensure that people didn’t have to watch from their computers. Anyone could sit with their friends and family and stream thousands of hours of media whenever they liked. That genie won’t go back into the bottle.”
One of the criticisms that was most frequently levelled against The Criterion Channel’s defunct predecessor FilmStruck was that its UX was lacking. While in the UK, VOD services like the ITV Player and the BBC’s iPlayer are serviceable lack some of the recommendation tools that have been instrumental in making sure that users stay glued to Netflix even after the whole series has been binged.
The reality is that as newer entrants into the market begin offering exclusive content, they will inevitably be measured against the best in the environment. In order to succeed they’ll need to be as good or better to compete, as we’ll discuss later.
Platform availability
As Ramedia pointed out, Netflix made it a point to have a presence on each and every possible platform, from desktops to connected televisions to games consoles, including the shockingly poorly selling Wii U. Now, Disney appears to be following suit: Its announcement included a slide that showed each piece of tech hardware it intends the service to run on.
The point about existing across all these platforms isn’t that those streaming services believe they’ll necessarily get tons of sign-ups through those platforms or even because they exist on them. After all, the install base of the Nintendo Switch, while impressive for a relatively young console, is far smaller than the number of people who will sign up on desktop or connected TV. Instead, it is primarily in service of providing a holistic service to their subscribers, ensuring that they always have access to one particular streaming service on each and every device they own.
As with UX, the idea is to reduce any possible friction for a subscriber base, to ensure that no competitor gets a look-in or advantage from existing on a device that Disney+ does not. And as another plus for us Switch owners, it all but guarantees that Netflix will join Hulu on the console sooner rather than later.
Entrenchment
For many, Netflix’s early entrance into the market all but guarantees it success. It is the go-to comparison when we talk about rival streaming services, and its ubiquity has led to ‘Netflix-like’ comparisons for other digital services. Its entrenchment in the market is primarily due to the early mover advantage it has enjoyed, of which the service is keenly aware. As its competitors gear themselves up to compete in terms of content, Netflix appears to be digging itself in deeper by prioritising maintaining market share above profit. As Variety’s Todd Spangler reports:
“One reason Netflix is continuing to make big investments now is that it’s going to face serious new streaming competition from media giants Disney, WarnerMedia and NBCUniversal starting later this year. So it’s focusing on building out a wider moat instead of delivering profits, a strategy Wall Street continues to praise.”
That makes it an uphill struggle for any new entrant into the market. This is the case even for those without the deep pockets of Amazon, Apple or Disney who can gradually chip away at Netflix’s 139 million global subscribers through offering lower price points or a greater back catalogue.
Despite the ongoing success of the larger streaming services, growing consumer dissatisfaction with the total cost of subscriptions and a soft cap on the amount people can afford to pay means competition is only going to get fiercer over the next few years. And as the dismal performance of YouTube Red (now Premium) demonstrates, investment in original content alone is unlikely to be the sole differentiating factor. Instead, a combination of the other three criteria and harder to measure qualities including audience affinity with a brand are likely to be the determining factor for success in the streaming world.
The older the consumer, the more time spent watching television. Among adults 18-34, 39% of media consumption occurs on digital (e.g. smartphones, tablets and desktops), 15% on connected TVs (e.g. Apple TV, Roku, Google Chrome) versus 29% on live-TV and 17% on radio. In contrast, Adults 50+ spend 53% of their time on live-TV, 21% on digital, 17% on radio and 8% on connected-TVs. It’s no wonder traditional TV networks are clamoring to remain relevant and shifting to digital options such as HBO to go, CBS’ All Access and MTV’s Snapchat Channel.
