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Mild dread was my first reaction when Disney announced that they were pulling their content from Netflix to form their own streaming service. Severe annoyance came next, when tech giants like Apple and Facebook decided to ramp up their streaming efforts, too.
TV is currently going through a space race, with streaming as the proverbial rocket and the profits as the moon. Everyone wants a slice of that Netflix-styled DTC (Direct-to-Consumer) content, and much noise has been made about the upcoming “streaming wars”. Specifically, which companies will survive and which ones won’t in this knock-down, drag-out fight for eyeballs.
Of course monopolies are bad, as can be seen by Comcast’s ongoing stranglehold on American internet services. A little healthy competition is always good. But as this news about additional streaming services kept rolling in, my resignation towards our current media trajectory gave way to an overwhelming sense of deja vu.
We’ve been here before, with the music industry’s disastrous mishandling of the early aughts digital download craze. The average user comes to streaming because of its consolidation, convenience, and customization. If you split up the content, you risk sinking the model.
The 101s of Internet Consumption
To explain this ill-fated venture, we need to take a trip down memory lane. Imagine the year is 1999, and Web 1.0 is roaring. Internet speeds are marginally faster. Hacking has been popularized by movies like The Matrix, and onto this proto-digital scene emerges a new service: Napster, a peer-to-peer client that allows people to download music without paying.
We’re not going to make an argument for illegal downloading, as a switch to streaming drove web culture (and the average consumer) away from that trend. But it’s important to note why this type of downloading was so popular, beyond the fact that people weren’t paying for it. Prior to Napster, access to music, TV shows, and films was limited. YouTube was a twinkle in the influencer’s eye, and Netflix was still a mail-order service. If you wanted to listen to your favorite musicians, you had to buy one CD per band for every album, at roughly $15 to $20 a pop. That’s a pretty big price tag that added up quickly.
Into this quagmire of stagnant media wandered peer-to-peer downloading. It seemed to offer a panacea for the average consumer, and answered a growing desire for customization and convenience. It also pitted a vocal public against outdated industries that refused to change. To say this clash nearly crippled the music industry is an understatement. The business has since pivoted to streaming, but the most recent report on the state of (legal) downloads shows that the industry’s overall revenue stream has been cut in half in just four years. Netflix’s talent for disruption allowed the TV and film industry to avoid a similar fate, but Netflix’s success can also be attributed to timing.
Back in the early 2000s, new media users were hungry for change. Netflix answered this desire by leaning into technological trends in a way that other companies had previously been skittish of. Now, the streaming landscape is bloated. To think that creating yet another streaming service will lead to Netflix-styled profits is foolhardy, at best.
Netflix and Those Dollar Bills
Netflix has changed a lot over the years. Originally an online DVD rental store, it was the magnum opus of Marc Randolph and Reed Hastings. Both of them admired Amazon’s savvy and wanted to create a similar service for movies. Their method of doing so was simple but revolutionary: on-demand movies shipped directly to your home, cutting out the need for a brick and mortar location.
Since 1997, Netflix has built upon this reputation for convenience. They pivoted from physical DVDs to streaming content directly into people’s homes, which gave consumers access to an array of shows and movies for a single flat fee per month. As both the carrier of third-party content and the producer of exclusive shows, Netflix also hit on the third aspect that is so important to keeping consumers locked to your service: consolidation. Why leave for another platform when everything you need is right there? Better yet, give customers bonus content for staying.
This is why streaming was and remains so popular.
Consolidation is a key factor in how Amazon became a titan of e-commerce. Facebook consolidates your personal network of friends, coworkers, and family, then barters in data. Disney consolidated their theater profits by buying almost every big franchise out there, up to and including the kitchen sink.
Through their own consolidation, Netflix was able to rocket to streaming success and cultural relevance, ranging from now-ancient memes like “Netflix and chill” to producing diverse content that won them accolades. And I mean, I’m not complaining about this at all. I love how easy it is to watch Netflix; how I can sit down to one-movie-per-night from the comfort of my own bed. I love how it brought me access to shows I would have never of heard about otherwise, and I’m definitely not the only who feels this way, as Netflix’s 2018 profits can attest.
But these profits caused other companies to start looking for ways that they could join in on the action. Tech behemoths like the aforementioned Facebook and Apple entered the fray, and traditional outlets like NBC and Disney did, too. But what happens when all these companies launch their competing services all at once? What happens when they start pulling their proprietary content from Netflix to feature it on their own channels, thinking that Netflix’s audiences will follow?
While this strategy might work for Disney+, it will be difficult for other companies to keep up in an already bloated market. It also fundamentally misunderstands the aforementioned reasons why people like streaming.
“NBCUniversal’s experience with Seeso is a cautionary tale that programming an on-demand outlet is very different from selling linear channels on a wholesale basis to MVPDs,” explains Cynthia Littleton for Variety, when talking about the early missteps the company took in launching its now-shuttered service. “The importance of offering users the ability to custom-tailor their viewing experience is vital.”
And there it is, really: the issue with starting all these streaming services at once. People want the convenience of finding their content in one place, and they want to tailor content to their specific needs in a manner that is vastly different from traditional TV models.
How can you tailor content when you have to go to multiple different streaming services to access it? What about the price? People have gotten used to this consolidation, and if you think consumers will join your platform out of a devotion to a particular franchise—Star Wars or Marvel excluded—then I begin to question your optimism.
Where Streaming Is Headed
So where does that leave us—and these companies—now that the “streaming wars” have kicked off?
Nowhere, for starters, at least in the short term. Disney+ will do just fine because of their catalog. The demise of Netflix is much exaggerated, as their long-term goals include 50% original content and their international subscription rates are up. But for other companies, a massive war chest and unlimited content is not always an option. The chances of them getting off the ground in any meaningful way remain slim.
Each of these streaming services will have a price tag attached, which will add up for the average consumer on a monthly basis. Eventually those consumers will whittle down their options to save themselves some money, the same way they did for CDs in the early 2000s.
Paradoxically, by pulling widely-available content and making it exclusive, companies are creating content monopolies: an artificial sense of scarcity that can become unhealthy when brought to extremes. If you don’t understand the needs of new media consumers—and you apply antiquated profit models to retain them—you’ll end up sinking your own ship and burning out the streaming industry.
Want to hear more about the TV and film industry? Check out our article on movie theaters and why we stopped going to them.