We examine the entertainment and marketing industry’s ongoing volatility and literal nightmare: the streaming wars.
The media and entertainment industry is very familiar with the fundamentals of a great story. In short, you need three things: construction, conflict, and resolution. A compelling and interesting background must be constructed, conflict introduced (something disrupts the order of things), and resolution realized to complete the story.
But while we’ve become accustomed to really great storytellers making all of our weekends enjoyable, the powers in Hollywood have been thrust into their own disruption – with no resolution in sight.
Before we explore this trichotomy further, let’s examine some numbers for perspective.
- By 2031, the global virtual reality gaming market size is prognosticated to reach a value of US $86.22 billion
- In September 2022, The Gauge estimated that streaming usage represented 35% of video viewed in the US
- In 2020, nearly 500 billion hours of live streaming were consumed by viewers across the globe
Let all of that sink in for a second. Millennials are not only spending less time skimming books, but they’re also cutting cords, burning daylight hours to game rather than punch a clock and, dare I say it, even creating desirable content (albeit in worlds built adjacent to our own).
With two segments, live streaming and industry streaming, making up 70% of all video consumption in 2022 combined, forecasting the victor of the streaming wars is still challenging. Cable is on the ropes, there is more competition now than ever, yet the cost of entertainment has never been greater.
So how did we arrive in this construct?
Streaming wars declared almost two decades ago
While many have claimed that the streaming wars began around the onset of COVID-19, as streaming companies began to compete for remote workers bored out of their minds, the catalyst for this war can actually be traced back to the late 90s and early 2000s.
For one, internet and cable companies of the day, ever complacent and comfortable with their monopoly on content delivery, refused to even pretend to be competitive. Some companies were so cocky, in fact, they told their customers to bring their own browser UIs for a seperate monthly fee (called BYOB: Bring Your Own Broadband), on top of their primary internet service. In other words: This internet thing, it’s ours. Until it wasn’t.
So was the mindset of all entertainment companies of the day: take it or leave it. Want a more reliable internet or cable company? Wait. Want better customer service? Please hold.
Consumers had enough. They wanted options; but where could they go?
First shots fired in the streaming wars
I remember exactly where I was when it was reported that Google had purchased YouTube; pulling out of a McDonald’s drive through in Florida – pop and a fry, double cheeseburger with ketchup, no onions. NPR had just reported that Google bought YouTube for an ungodly amount of money, a company that wasn’t yet profitable, and there were questions about whether even Google could maintain the space needed to store all the video being created. Does this business model even make sense? Has Google reached too far? Talk about the sky falling.
Yet, while I can remember where I was for this seemingly arbitrary news, cable providers were undeterred in the face of this rapidly evolving medium. In fact, most cable providers viewed even Netflix’s risky venture into streaming in 2007 as a novelty; the content delivery mechanisms needed to dethrone cable were just unfathomable for the C-suite.
But in 2005 and 2007, YouTube and Netflix, respectively, whether cable companies understood the sitch or not, spent the next 10,000 hours preparing for war.
It is said that it takes most people 4,000 – 5,000 hours to become proficient in their work and 10,000 hours to become experts. This works out to roughly two and a half and five years in a typical job.
The same can be said for industries. It takes two to three years for new concepts to take hold, and between three to seven years for the disruption to become a market norm. Between 2007 and 2012, Netflix successfully transitioned its DVD mailer business into a full fledge streaming entertainment company. Notably, the next four to five years were marked with exceptional growth in original programming.
In all, we’ve witnessed Netflix go through this cycle between four and five times.
The first phase was its launch as a new business. The second phase saw the company become a verb in American homes as an alternative to Blockbuster and Redbox (gonna Netflix it up and chill). The third and fourth were licensing and developing as mentioned above. And the fifth was the company’s foray into international programming.
The point is that we have only really witnessed the disruptor (Netflix) mature, not the market, and it could be argued that Netflix isn’t even finished yet. However, market maturity in the streaming industry overall is just getting started.
Streaming today
With the exception of a few late entrants still working out kinks, all major media and tech companies have declared their intention to enter the streaming wars. Disney, Apple, Paramount, NBC, and more have now begun to divert their attention away from traditional media and invest heavily in content and delivery. And by the close of 2022, Nielsen has projected that these streaming services will overtake cable completely.
But believe it or not, we’re still in the early stages; so much is unclear.
Questions that still need to be resolved
Continued OTT fragmentation has led to the creation of apps like JustWatch and Likewise, which promise to tether your entertainment subscriptions back to one hub (like your cable guide used to). But where does this all end? Will consumers be paying $9.99 for every channel by 2030?
Here at STW, we’ve counted more than one hundred streaming services most consumers don’t know about, and this growth looks set to continue well into the next decade.
And, of course, the question about what role live streaming will play in this new wild west still lingers. Are live streamers our future hosts, entertainers and VJs in an increasingly meta world? Are we looking at a conflagration of futures that blend the worst of the Minority Report’s intrusive A.I. in malls with live streamers in Mark Zuckerberg’s Metaverse? Something worse? Or better?
Best guesses
Last summer, after Netflix announced its first quarterly subscriber decline in over a decade, industry leaders declared the streaming giant boomer-town USA; it’s over, schedule the procession.
However, we predicted this was a temporary setback for the giant. And it has been.
Netflix is stronger today than ever, regardless of naysayers or competitors looking to jaw up the chum consumers have dropped in the water. Streaming now accounts for 35% of all viewing in the U.S. However, in 2023, streaming will represent the majority of all media consumption. Are we to believe that companies like Netflix won’t eat up some of what’s left of the 65% of media that isn’t considered “streaming” yet?
We find it extremely unlikely that giants like Netflix will be going anywhere, anytime soon. We think they’ll adjust again; call it phase six. But not everyone agrees.
Opening with perceived unimpeachable corporate realities of the day, Vox wrote in 2016 that cable would win the streaming wars because cable companies were owned by or did own the studios creating the content.
They assumed that Netflix and Hulu’s business model would not change (they licensed content primarily at the time). And in theory, had none of the streamers begun investing in their I.P., this conclusion was right on the money. Who knows, it could be still.
But this market hasn’t matured, there are no practices that define it – and speaking of, do any even exist for some of the newer forms of content consumption like gaming and live stream marketing? Until norms are established in the industry, we are nowhere near the type of market maturity that would be needed to call a winner. At best, we may be at halftime, but there is still so much clock to play through.
Ultimately, we have no idea where this industry will go next, but here is a fact: it will be unrecognizable in another ten years. In other words, we’re still knee-deep in disruption – with no resolution in sight.