Streaming Wars - The Empires Strike Back
In our very own galaxy, in a time not so long ago, first there was Netflix. Then we had Amazon Prime Video. Later Hulu appeared, and over the coming few months several big new streaming services will drop from Apple, Disney, NBCUniversal and WarnerMedia. The big media empires are gearing up for a streaming offensive of Star Wars proportions for every content-hungry consumer. Why Star Wars? Well, we are talking multi-billion battles on a global scale for an industry worth trillions of dollars. The old media and entertainment empires have waited long enough for other players to feed on (i.e. monetize) their content. The time to strike back and take things into their own hands has come. Will 2020 be the year of new hope for Netflix? Or will it be the year of the attack of the clones? Or maybe the rise of a new global streaming dominator?
The key battle, as usual, will be on the U.S. market.
A HarrisX poll study conducted in August among 6.621 U.S. adults showed that 21% of U.S. households plan to sign up for Disney+ (Disney owns the Star Wars franchise, btw), which launches November 12, with a price set at $6.99 per month. The same poll said that 11% intend to sign up for HBO Max and 10% intend to sign up for NBCUniversal’s service, Peacock.
Neither HBO Max, nor Peacock have revealed their pricing policy yet, even though Peacock is expected to be free for Comcast and Sky TV subscribers. However, content and not the fees will be the decisive factor for many would-be subscribers. According to the survey, 34% of respondents said that the movie library is the most attractive aspect of Disney’s new streaming service. Original content on HBO Max and TV series on Peacock were also of interest with respectively 25% and 17%.
The poll suggests that Disney+ and HBO Max will perform better than current SVODs with certain demographics. Currently, streaming services attract 25% of consumers in the 25-36-years-old range, 17% Hispanics and 11% African Americans. According to the HarrisX survey, 39% of the 25-36-year-old consumers, 20% of African American households and 20% of Hispanic households are likely to sign up for HBO Max, and 37% of 25-36-year-old consumers, 14% of African American households and 21% of Hispanic households are likely to sign up to Disney+.
Netflix is still the leader but for how long?
According to Parrot Analytics’ Global Television Demand Report for Q1 2019, overall Netflix retains its market-leading position with 64.6% of the global digital original demand share. However, the 24-month platform share trend in each of the 10 markets in this study reveals that Netflix’s share is slowly declining in most markets. Indeed, for the first time ever Netflix’s demand share has dipped below 50% for some market/genre combinations. Across all markets, the share of demand for digital original series is highest for Netflix series: 64.6% of the global demand for digital originals is expressed for a Netflix Original. In 2018 that percentage was 71%. Amazon Prime Video and Hulu also lost more than 1% each. Increased demand for series from YouTube Premium and DC Universe has driven these changes.
The increased competition pumps up the content-making machine. In its report for 2018 Parrot notes that together the three largest US SVOD services have invested an estimated $19.5 billion in content creation and licensing. In 2013, the combined content spend was only $4.5 billion. At the start of 2018, the estimate for Netflix’s content spend was $8 billion but the actual spend was 50% higher - $12 billion. It could reach $15 billion this year.
The highest estimate for Amazon’s 2018 content spend stands at $5 billion, a small increase from their 2017 spend. Hulu, in turn, invested an estimated $2.5 billion on content in 2018, a figure unchanged from their 2017 spend.
Despite its obvious leadership in terms of original content production, Netflix is already feeling the pressure from the upcoming new players. The shares of Netflix hit a nine-month low in September, while CEO Reed Hastings admitted at the RTS: “While we’ve been competing with many people in the last decade, it’s a whole new world starting in November… between Apple launching and Disney launching, and of course Amazon’s ramping up.”
The new players
Ampere Analysis has published an extensive profile of six new SVOD players launching in the American market (and some of them internationally) from late 2019 to the first half of 2020. Four of these are part of content “empires”: Disney+, Viacom’s BET+, WarnerMedia’s HBO Max and NBCU’s Peacock. Apple TV+ is part of a different kind of “empire” which is slowly turning into a content juggernaut with its $6 billion original production commitment. To those, “independent” short-form start-up Quibi has been added. Here is how they fare in terms of originals:
Disney+
The largest player by some margin in terms of originals, Disney+ has 61 upcoming original series and titles, despite its vast back catalog. The studio is focusing its streaming offer on TV and movies, with TV spin-off The Phineas & Ferb Movie, and a live-action remake of The Lady & the Tramp movie. Over one third of its original content is unscripted.
Quibi
The mobile-only platform can compete with Disney+ in terms of number of titles, albeit at a much shorter length of approx. 10 minutes per episode. Quibi is entirely reliant on the success of its original titles as its short-form nature means there’s no back catalog and no acquisition targets. The start-up has the highest proportion of unscripted content of the six players at 40% and is targeting it at a youth-skewing audience.
Apple TV+
Without a studio library to access, Apple TV+ is focusing on extremely high-budget, big name flagship scripted series, such as The Morning Show featuring Jennifer Aniston. 87% of commissions to date are scripted.
HBO Max
Buoyed by its existing catalog, Ampere expects HBO Max to be led by premium scripted content, although it has recently announced its first two unscripted original commissions.
Peacock
With under five originals, Ampere expects the service to be mainly catalog-focused. It has just commissioned a third season of high school comedy A.P Bio, previously cancelled at sibling linear network NBC. To date all announced content is scripted.
BET+
Just like NBCU, BET+ has less than five originals to its name to date, and so will also rely on its existing catalog rather than original content. Another similarity with Peacock is that all announced content is scripted.
There are also differences in the target audiences with Disney+ focusing on family content, Quibi aiming at teenagers and young adults in the 16-40 demo, while BET+ is obviously dedicated to the African American audience. WarnerMedia’s HBO brand also comes with an already established audience via linear TV.
The bulk of commissions for the new SVOD services are drama series, many of them in well-worn genres. Ampere found, quoted by The Hollywood Reporter, that more than one quarter (27%) of scripted commissions across the six new services were sci-fi and fantasy series, followed by crime and thriller shows (21%). “These genres have proved particularly successful for Netflix and Amazon,” Ampere analyst Fred Black comments. “The new competitors are looking at that and trying to replicate it.”
Black sees a sharp contrast in the strategy of the non-studio players when it comes to their SVOD offerings. Apple, he notes, is taking an approach similar to Amazon: “Apple can afford to make a loss on content just to fuel people purchasing their hardware, to get more people to buy iPads and iPhones,” he notes.
Quibi, Jeffrey Katzenberg’s big push into short-form content, is “a real wild card,” Black says, “there’s nothing like it on the market at the moment so it is hard to say how it will do.” He sees Quibi placed somewhere in-between long-form subscriber-based services Netflix and Amazon Prime and advertising-supported social media and online sites where audiences currently consume the bulk of short-form content, including YouTube, Snapchat and Facebook Watch.
Aside from first-starter advantage, both Netflix and Amazon Prime also have a big lead over the new SVOD entrants when it comes to the internationalization of their content. Netflix has roughly a 50-50 split between U.S. and international original series and Amazon’s originals slate is close to 60-40 U.S.-to-international.
But the pricing of the new players is much lower than that of Netflix: Disney+ ($7 per month) and Apple TV+ ($5 per month).
The size of the battle
In one of its latest reports from September Ampere Analysis announced that existing subscription OTT services are set to exceed 1 billion subscriptions by the end of 2021, while a new SVOD report from Futuresource Consulting reveals that SVOD already reaches more than 60% of households in North America, 26% in Western Europe, 21% in Asia-Pacific and 19% in LATAM. “SVOD has come of age, with consumer spend exceeding $29 billion last year, up 38% on 2017,” says David Sidebottom, Principal Analyst at Futuresource Consulting.
Netflix and Amazon Prime Video accounted for one-third of all subscriptions globally in 2018. However, when it came to SVOD spend, the two companies commanded almost two-thirds of the market, with Netflix leading the way in terms of headlines, subscribers and revenue, adding an extra 31 million subscribers to its ranks in 2018.
“Consumers face an increasingly confusing video landscape,” says Sidebottom, “and partnerships between trusted Pay TV or content aggregation platforms like Amazon Channels, Roku, Apple, and even Pay-TV providers, will be a vital aid to navigation. Due to large populations of existing users, Apple and Amazon Channels are both well-placed to succeed in the soon-to-be-fragmented world of aggregation, but both currently lack ubiquity of content internationally. However, this new breed of ‘super aggregators’ will become an important component in the battle for the living room, though, in many instances, they have yet to fully realize the three consumer requirements of quality, original content and price.”
A new TiVo study has found that even though cord-cutting is more ubiquitous than ever, consumers are still holding onto their pay TV subscriptions, sometimes opting for a combination of both. More than 80% of survey respondents admitted to still having cable/satellite service, and the numbers indicating that they are “very satisfied” with this service increased 9.4% year over year. The study, titled Video Trends Report: An Ocean of Options, also reported that multi-service usage has grown 14% year-over-year. In addition to pay TV, consumers are utilizing some sort of SVOD as well as AVODs such as YouTube or Facebook.
Who’s got The Force?
Who will be the winners in the “Streaming Wars”? Bearing in mind that the big battle is only just beginning – it is indeed too early to tell. However, I would put my money on Disney+. Their content will include Disney, Pixar, Marvel, Star Wars stuff, 20th Century Fox movies, 25 original series, also National Geographic. Disney+ will have about 7.000 TV episodes and 500 films. Their CEO Bob Iger said eventually their whole catalog would be available on Disney+, and if there is one emperor of content - it’s Disney. It is also priced well, and by adding ESPN+ and Hulu – we certainly have a new streaming empire!
The current “ruler” of the SVOD world – Netflix – will have to fundamentally revamp its strategy. The truth is that Netflix spends $15 billion per year on originals but its most-appealing and popular content is licensed from its future competitors and it will eventually lose these titles. Despite having over 60 million users in the U.S. and over 150 million worldwide, Netflix is burdened by a huge debt and ever-increasing competition.
Apple might turn out to be a tough contender (it is, after all, a trillion-dollar company) but it simply does not have content (at the moment). It will spend “only” $2 billion per year on original content, while a clear streaming strategy remains a problem. For sure, avid Apple fans will get the service (users of new Apple products for free) as they are one of the most loyal consumers, but they will need content to keep them coming back and paying the bill. Big names are coming to Apple TV+, and the company is relying on the strength of its brand and products, but will this be enough?
While content is and will remain the king (or better an emperor), it comes with a royal price. If you want to watch everything or at least the highest-rated and most-talked about original content, it will cost you. The content choices will become even harder to navigate and the fear of missing out on the newest series will only increase – simply because you won’t have enough time (and/or cash). So May the Force be with you!
A HarrisX poll study conducted in August among 6.621 U.S. adults showed that 21% of U.S. households plan to sign up for Disney+ (Disney owns the Star Wars franchise, btw), which launches November 12, with a price set at $6.99 per month. The same poll said that 11% intend to sign up for HBO Max and 10% intend to sign up for NBCUniversal’s service, Peacock.
Neither HBO Max, nor Peacock have revealed their pricing policy yet, even though Peacock is expected to be free for Comcast and Sky TV subscribers. However, content and not the fees will be the decisive factor for many would-be subscribers. According to the survey, 34% of respondents said that the movie library is the most attractive aspect of Disney’s new streaming service. Original content on HBO Max and TV series on Peacock were also of interest with respectively 25% and 17%.
The poll suggests that Disney+ and HBO Max will perform better than current SVODs with certain demographics. Currently, streaming services attract 25% of consumers in the 25-36-years-old range, 17% Hispanics and 11% African Americans. According to the HarrisX survey, 39% of the 25-36-year-old consumers, 20% of African American households and 20% of Hispanic households are likely to sign up for HBO Max, and 37% of 25-36-year-old consumers, 14% of African American households and 21% of Hispanic households are likely to sign up to Disney+.
Netflix is still the leader but for how long?
According to Parrot Analytics’ Global Television Demand Report for Q1 2019, overall Netflix retains its market-leading position with 64.6% of the global digital original demand share. However, the 24-month platform share trend in each of the 10 markets in this study reveals that Netflix’s share is slowly declining in most markets. Indeed, for the first time ever Netflix’s demand share has dipped below 50% for some market/genre combinations. Across all markets, the share of demand for digital original series is highest for Netflix series: 64.6% of the global demand for digital originals is expressed for a Netflix Original. In 2018 that percentage was 71%. Amazon Prime Video and Hulu also lost more than 1% each. Increased demand for series from YouTube Premium and DC Universe has driven these changes.
The increased competition pumps up the content-making machine. In its report for 2018 Parrot notes that together the three largest US SVOD services have invested an estimated $19.5 billion in content creation and licensing. In 2013, the combined content spend was only $4.5 billion. At the start of 2018, the estimate for Netflix’s content spend was $8 billion but the actual spend was 50% higher - $12 billion. It could reach $15 billion this year.
The highest estimate for Amazon’s 2018 content spend stands at $5 billion, a small increase from their 2017 spend. Hulu, in turn, invested an estimated $2.5 billion on content in 2018, a figure unchanged from their 2017 spend.
Despite its obvious leadership in terms of original content production, Netflix is already feeling the pressure from the upcoming new players. The shares of Netflix hit a nine-month low in September, while CEO Reed Hastings admitted at the RTS: “While we’ve been competing with many people in the last decade, it’s a whole new world starting in November… between Apple launching and Disney launching, and of course Amazon’s ramping up.”
The new players
Ampere Analysis has published an extensive profile of six new SVOD players launching in the American market (and some of them internationally) from late 2019 to the first half of 2020. Four of these are part of content “empires”: Disney+, Viacom’s BET+, WarnerMedia’s HBO Max and NBCU’s Peacock. Apple TV+ is part of a different kind of “empire” which is slowly turning into a content juggernaut with its $6 billion original production commitment. To those, “independent” short-form start-up Quibi has been added. Here is how they fare in terms of originals:
Disney+
The largest player by some margin in terms of originals, Disney+ has 61 upcoming original series and titles, despite its vast back catalog. The studio is focusing its streaming offer on TV and movies, with TV spin-off The Phineas & Ferb Movie, and a live-action remake of The Lady & the Tramp movie. Over one third of its original content is unscripted.
Quibi
The mobile-only platform can compete with Disney+ in terms of number of titles, albeit at a much shorter length of approx. 10 minutes per episode. Quibi is entirely reliant on the success of its original titles as its short-form nature means there’s no back catalog and no acquisition targets. The start-up has the highest proportion of unscripted content of the six players at 40% and is targeting it at a youth-skewing audience.
Apple TV+
Without a studio library to access, Apple TV+ is focusing on extremely high-budget, big name flagship scripted series, such as The Morning Show featuring Jennifer Aniston. 87% of commissions to date are scripted.
HBO Max
Buoyed by its existing catalog, Ampere expects HBO Max to be led by premium scripted content, although it has recently announced its first two unscripted original commissions.
Peacock
With under five originals, Ampere expects the service to be mainly catalog-focused. It has just commissioned a third season of high school comedy A.P Bio, previously cancelled at sibling linear network NBC. To date all announced content is scripted.
BET+
Just like NBCU, BET+ has less than five originals to its name to date, and so will also rely on its existing catalog rather than original content. Another similarity with Peacock is that all announced content is scripted.
There are also differences in the target audiences with Disney+ focusing on family content, Quibi aiming at teenagers and young adults in the 16-40 demo, while BET+ is obviously dedicated to the African American audience. WarnerMedia’s HBO brand also comes with an already established audience via linear TV.
The bulk of commissions for the new SVOD services are drama series, many of them in well-worn genres. Ampere found, quoted by The Hollywood Reporter, that more than one quarter (27%) of scripted commissions across the six new services were sci-fi and fantasy series, followed by crime and thriller shows (21%). “These genres have proved particularly successful for Netflix and Amazon,” Ampere analyst Fred Black comments. “The new competitors are looking at that and trying to replicate it.”
Black sees a sharp contrast in the strategy of the non-studio players when it comes to their SVOD offerings. Apple, he notes, is taking an approach similar to Amazon: “Apple can afford to make a loss on content just to fuel people purchasing their hardware, to get more people to buy iPads and iPhones,” he notes.
Quibi, Jeffrey Katzenberg’s big push into short-form content, is “a real wild card,” Black says, “there’s nothing like it on the market at the moment so it is hard to say how it will do.” He sees Quibi placed somewhere in-between long-form subscriber-based services Netflix and Amazon Prime and advertising-supported social media and online sites where audiences currently consume the bulk of short-form content, including YouTube, Snapchat and Facebook Watch.
Aside from first-starter advantage, both Netflix and Amazon Prime also have a big lead over the new SVOD entrants when it comes to the internationalization of their content. Netflix has roughly a 50-50 split between U.S. and international original series and Amazon’s originals slate is close to 60-40 U.S.-to-international.
But the pricing of the new players is much lower than that of Netflix: Disney+ ($7 per month) and Apple TV+ ($5 per month).
The size of the battle
In one of its latest reports from September Ampere Analysis announced that existing subscription OTT services are set to exceed 1 billion subscriptions by the end of 2021, while a new SVOD report from Futuresource Consulting reveals that SVOD already reaches more than 60% of households in North America, 26% in Western Europe, 21% in Asia-Pacific and 19% in LATAM. “SVOD has come of age, with consumer spend exceeding $29 billion last year, up 38% on 2017,” says David Sidebottom, Principal Analyst at Futuresource Consulting.
Netflix and Amazon Prime Video accounted for one-third of all subscriptions globally in 2018. However, when it came to SVOD spend, the two companies commanded almost two-thirds of the market, with Netflix leading the way in terms of headlines, subscribers and revenue, adding an extra 31 million subscribers to its ranks in 2018.
“Consumers face an increasingly confusing video landscape,” says Sidebottom, “and partnerships between trusted Pay TV or content aggregation platforms like Amazon Channels, Roku, Apple, and even Pay-TV providers, will be a vital aid to navigation. Due to large populations of existing users, Apple and Amazon Channels are both well-placed to succeed in the soon-to-be-fragmented world of aggregation, but both currently lack ubiquity of content internationally. However, this new breed of ‘super aggregators’ will become an important component in the battle for the living room, though, in many instances, they have yet to fully realize the three consumer requirements of quality, original content and price.”
A new TiVo study has found that even though cord-cutting is more ubiquitous than ever, consumers are still holding onto their pay TV subscriptions, sometimes opting for a combination of both. More than 80% of survey respondents admitted to still having cable/satellite service, and the numbers indicating that they are “very satisfied” with this service increased 9.4% year over year. The study, titled Video Trends Report: An Ocean of Options, also reported that multi-service usage has grown 14% year-over-year. In addition to pay TV, consumers are utilizing some sort of SVOD as well as AVODs such as YouTube or Facebook.
Who’s got The Force?
Who will be the winners in the “Streaming Wars”? Bearing in mind that the big battle is only just beginning – it is indeed too early to tell. However, I would put my money on Disney+. Their content will include Disney, Pixar, Marvel, Star Wars stuff, 20th Century Fox movies, 25 original series, also National Geographic. Disney+ will have about 7.000 TV episodes and 500 films. Their CEO Bob Iger said eventually their whole catalog would be available on Disney+, and if there is one emperor of content - it’s Disney. It is also priced well, and by adding ESPN+ and Hulu – we certainly have a new streaming empire!
The current “ruler” of the SVOD world – Netflix – will have to fundamentally revamp its strategy. The truth is that Netflix spends $15 billion per year on originals but its most-appealing and popular content is licensed from its future competitors and it will eventually lose these titles. Despite having over 60 million users in the U.S. and over 150 million worldwide, Netflix is burdened by a huge debt and ever-increasing competition.
Apple might turn out to be a tough contender (it is, after all, a trillion-dollar company) but it simply does not have content (at the moment). It will spend “only” $2 billion per year on original content, while a clear streaming strategy remains a problem. For sure, avid Apple fans will get the service (users of new Apple products for free) as they are one of the most loyal consumers, but they will need content to keep them coming back and paying the bill. Big names are coming to Apple TV+, and the company is relying on the strength of its brand and products, but will this be enough?
While content is and will remain the king (or better an emperor), it comes with a royal price. If you want to watch everything or at least the highest-rated and most-talked about original content, it will cost you. The content choices will become even harder to navigate and the fear of missing out on the newest series will only increase – simply because you won’t have enough time (and/or cash). So May the Force be with you!
