The Streaming Video-on-Demand War Is Getting Intense

streaming giants

If you want a dramatic, dangerous race in the months ahead you should check out the competition in the world of streaming. It guarantees to be the media industry’s equivalent of the marathon, the annual exhibition in which a steely group of strength athletes gather in the arid valleys of California and race upward on foot for 135 miles. In the summer. In Death Valley. yes, it is actually this cutthroat.

Netflix will remain the leader of the industry by the end of 2020, but which SVOD Service will be the first to reach 50 million subscribers? according to the odds, Disney+ will be the one to grow the most.

By 2020, Comcast’s NBCUniversal, AT&T’s WarnerMedia division, Walt Disney, Plex, and Apple will all have released shiny new streaming video services, taking on the current ones from Amazon, CBS, Hulu, and the giant Netflix. It’s doubtful that any of these media and tech titans will leave this looming showdown unharmed. Even the final winners are expected to stumble into the future bloodied and wrecked.

The media giants are trying to win on Netflix Inc.’s domain now because they don’t have many options left. The success of Netflix’s model—charging a monthly fee for a huge amount of ad-free, on-demand shows and movies that streams to any internet-connected gadget—has inspired millions of people to drop out of their pay-TV service and get their home entertainment from online services. At the same time, the telecommunications and tech businesses have watched Netflix and Amazon Prime Video yield vast amounts of precious consumer data from their viewers and choose to start a successful streaming service might be an excellent way to sell more of their existing goods (smartphones for Apple Inc., wireless contracts for AT&T Inc.). The method will be to continue through short-term risks.

Netflix

For years, Disney, NBC, Time Warner, and other entertainment giants experienced a lucrative, straightforward business design. They packaged TV programs into channels, then sold them to customers through cable and satellite publishers such as Comcast Corp. which pass along recurring agreement fees even if few people are watching a channel. The networks collected billions of dollars from the promotion they give out during commercial breaks.

The streaming world has proved mostly inhospitable to business interruptions. Netflix and Amazon Prime Video don’t have any. And both have hardened it out to control the market without needing advertising income. The new players have to master the art of drawing and retaining loyal streaming viewers to remain in the long run. It won’t be that straightforward.

Before the streaming days, if a media company had a lull in one of its network’s lineups, it was isolated from the resulting viewer indifference by big bundles of adjacent options. For example, a subscriber to Dish couldn’t cancel the Food Network without also leaving CNN, ESPN, and TNT, among numbers of others. Even the process of cutting was unappealing. It required the trouble of calling a customer service rep prepared to bob and weave and wear down would-be turncoats with engaging counteroffers.

The terms of the new race are much less kind. The internet has made cutting streaming services easy. There are no calls, no tight sales forces to defeat, no sacrificing of co-bundled products. To leave one service in favor of another takes only some online clicks. As a result, a temporary dry spell in a streaming network’s lineup could start an outbreak of abrupt departures.

disney +

Brett Sappington, an examiner with Parks Associates, market research and advising company, says that though annual cancellation rates with traditional cable and satellite distributors float around 4%, surveys of customers show that churn rates at streaming giants tend to be much higher. Netflix, which has the cheapest turnover rate of any streaming service, still misses about 7% of its existing subscribers every year, he says. It goes up from there. “The brand-new services are the ones that have the greatest churn,” Sappington says.

Not bound by contracts, streaming subscribers can simply be lured away. In surveys, Parks Associates found that 28% of customers said they have subscribed to a streaming service to watch a single TV show or movie.

To engage subscribers and attract those of their rivals, the services will have to attempt to stock both famous reruns and fresh shipments of original programming, which will be very expensive. In preparation, the rivals are taking some extreme measures.

amazon prime

Recently, Walt Disney Co.—the company with the richest library of popular characters and shows in the world—decided its programming library still wasn’t strong enough and paid $71 billion for the bulk of 21st Century Fox. Earlier this year, Disney bought to pay at least $5.8 billion to Comcast to take over full control of Hulu. CBS Corp. has added many original series exclusively for its online channel, CBS All Access. These add Star Trek: Discovery, which costs $8 million on average per episode, making it one of the most expensive shows in TV history, according to Variety.

In search of a globally powerful attraction, Amazon.com Inc. got the rights to make a TV series based on The Lord of the Rings, paying some $250 million before a single script has been handed over, an actor hired, or a bucolic hamlet activated. WarnerMedia is developing a beautiful Game of Thrones prequel for HBO. Apple has got TV help from Steven Spielberg and Oprah. In April, Disney said it intends to spend more than $1 billion on original programming in financial 2020 for Disney+, which is scheduled to start in November. The company doesn’t expect the streaming service to turn a profit until 2024.

Netflix is not far behind the company has been expanding the field of the race by spending heavily on video infrastructure, production, and talent in Africa, Asia, Latin America, and Europe. While gathering more than 150 million subscribers all over the world, the company has also been signing off Hollywood talent, signing proven performers and show creators at high-priced, multiyear deals ($300 million for showrunner Ryan Murphy), and bold competitors to keep up. Many plans are double-edged. Netflix has paid Chris Rock $40 million for a pair of shows, together wooing comedy fans to subscribe while also puncturing the tire of its rival HBO, where Rock was long the face of stand-up comedy.

“Netflix is leading the game with so much attractive content and a brand name and a position in people’s lives,” says Tim Nollen, an analyst at Macquarie Group. “If there’s anyone traditional media company that can battle with Netflix, it’s Disney. They have customer awareness and content that people will pay for happily. That doesn’t mean Disney wins and Netflix loses. It means that Disney is one of the several that can strongly play that same game.”

HULU

The costs of joining the streaming race are no less daunting. For years the established media companies were able to reduce the blow of failing DVD sales and rentals, in part, by renting their shows to Netflix and Amazon. Now the days of raking in this easy money are turning down, as media companies buy back the streaming rights to their classic shows and movies. For the exclusive rights to Friends, which will stream on the HBO Max service, AT&T is paying $85 million a year. NBC has accepted to spend $100 million a year for the rights to The Office. The favorite reruns of both shows have been running on Netflix.

Standing out from the pack of opponents won’t be easy. Last year, Netflix paid $2.4 billion on marketing—that’s about HBO’s whole programming budget for 2017. Over the years, Netflix has worked every kind of trick to get attention. It’s acquired a pricey Super Bowl ad, paid for myriad billboards along the Sunset Strip in Hollywood, given stickers depicting rolled-up dollar bills and faux lines of cocaine in public toilets nationwide to promote the show Narcos, planned a magazine, created “smart” socks designed to pause viewers’ TV if they fall asleep while watching the show, and deployed a bunch of Stranger Things-branded pedicabs to ride into New York blasting ’80s music.

“If you’re Disney, you can put a flyer in every hotel room in every park at all of your properties and resorts,” Sappington says. “If you’re, you have all of your communication and wireless setups. That’s going to be a big part of it. How are you going to make a sound for yourself in a crowded market?”

The costs will also be hefty. Going direct-to-consumer will need the media giants to handle all sorts of dirty tasks such as customer service and billing that they have long committed to their distribution partners. They’ll also need to hire armies of technology experts, which includes data scientists, software engineers, and also product designers, to create and maintain their streaming programs. None of which is cheap. Just ask Disney, which has paid about $2.6 billion taking over majority ownership of BAMTech, a company best known in streaming technology.

AT&T

Some media giants have sized up the terrifying terrain and decided to sit out this one. In 2018 an examiner at Goldman Sachs Group Inc.’s annual Communacopia Conference asked Bob Bakish, chief executive officer of Viacom Inc.—which boasts a slate of youth-oriented TV networks which involves a Comedy Central, MTV, and Nickelodeon—about his business’s plans to enter the direct-to-consumer market. Bakish was not bullish. “What we’re not doing is producing a mass-market, [subscription video-on-demand] service, something similar to Netflix,” Bakish said. “And the reason for that is twofold. One is that the business is looking more and more packed. And the second thing is it’s a very money-oriented game.”

Others have been frightened off as well. For years, officials at IAC/InterActive Corp., the New York-based media giant, said its video platform Vimeo was going to start a subscription video-on-demand service giving a slate of original programming which is relatable to Netflix. But then in 2017, after a lengthy reconnaissance mission, the company stated it was backing out. Recently, IAC Chairman Barry Diller described Netflix as virtually unbeatable. “No one’s going to fight with Netflix in terms of gross subscribers,” Diller told CNBC in July. “I think they have won the game.”

In fact, the race is just going to start in the year 2020 when major streaming giants join the game, and the treachery of the scene is such that even Netflix is not protected from severe stumbles. Earlier this year the company increased its prices, in part, to help pay for its huge investments in programming, which touched $12 billion in 2018. The price increase did not go unpunished. In July, Netflix revealed that during the second quarter it had experienced a net loss of U.S. subscribers for the first time in eight years. Shares fell, obliterating more than $24 billion from its market price over the next 6 days.

As peak TV comes into the arid valley, expect to see a lot more moments of pain. Bon voyage, streaming service officials. Please drink plenty of water.

Loading...

Leave a Reply