2020 : A Pandemic of streaming services!
They say businesses need to adapt to changes in the industry…The biggest disruption in the entertainment industry right now is providing content directly to consumer AT ANY TIME THEY WANT. Cable connection was already an existing solution to provide content direct to consumer but because the movie timings weren't flexible with the consumer this gave rise to a new industry called Over The Top (OTT) service. Netflix being the first ones to recognize this opportunity quickly saw its potential and then became a competitor to the then incumbent Blockbuster. Blockbuster which provided movie rental service failed to adapt to this OTT service and eventually went bankrupt. This is how streaming as an industry started but how did we get to stage where almost every month there is a new streaming service coming up.
Netflix had contracts with every major movie distributor when it started…so basically most movies came to Netflix which helped build its subscriber base which exceeds 180M as I write. Big media houses after looking at this success saw it as an opportunity to vertically integrate, which in simple words is to take the job of producing , operating and distributing content directly and independently. After this it was only a matter of time till everyone adopted. In this mean time the company which has its presence in most tech related platforms Amazon came up with their service :- Prime Video. Prime as a business model is different from Netflix. As a standalone product prime isn't appealing but if you combine that with the privilege of being a premium amazon member it might just be worth it. Prime video is like the side service to keep your consumers loyal to the main service (which is e commerce).Moving on to the other OTT service….
One of the first major companies to formally announce their plans to enter the streaming market was Disney plus and rightly so because Disney has a content library of a few decades. Their content is highly valued and they have made at least one billion dollar film at the box office since 2015. All these popular films made by Disney went to Netflix but now they have started taking down their content from their platform (obviously). Disney owns the most popular studios like Marvel, Pixar and Star Wars. The fan base of these franchises are unmatched. This is the reason why Disney plus got a big welcome to the streaming world, they gained 10M subscribers on the first day of its release. Disney also got money from merchandising of their shows . A cute Baby Yoda as an icon gave the perfect start to Disney plus.
Disney bought another big movie studio in the form of 21st century Fox this helps them get an advantage in India. In India Hotstar is the biggest platform with 300M active customers because some of their content is free. With the Fox acquisition Disney gets Hotstar and get a huge subscriber base. Hotstar also streams live cricket matches and the IPL tournament is basically a religion in India. Even as a separate platform Hotstar is sustainable so it is a very big advantage to Disney In India. They got 8M paid subscribers from India within a month compared to Netflix which got a million subscribers after a 1 year presence in India. Disney unlike Netflix has other revenue streams from their merch , parks and box office and that is why the pricing of it less than Netflix.
The current challenge for Netflix is that every major movie studio is following the same pattern of removing their content. Netflix has done well so far in challenging other platforms because they spend so much on creating original content. Some of their originals have also won Academy awards. The strength of Netflix lies in their commitment to provide original content. Every week there is a new Netflix original coming up.Binge watching is a phenomenon started by Netflix which is to finish a season in one sitting this is a trend unlike traditional content norms of releasing an episode daily or weekly. This phenomenon just creates a further urge to consume more content. This way lets say a new show is released then the demand of that show remains high only for a few weeks instead of a potential month if they released episodes periodically(The Mandalorian was the biggest show in demand for a month).
Eventually everyone movie studio have started to find their own audience. HBO max a new service is banking on all the DC comics and F.R.I.E.N.D.S fans. Universal Studios is also on their way to launch their service called peacock.
So after looking at all these streaming what are the opportunities and threats to these services?
Netflix is the market leader currently. Their opportunity lies in their content which makes their consumers loyal. A single revenue stream is a matter of concern so do they keep increasing prices hoping all their loyal consumers will stay? Is the customer willing to pay the highest price for the best original content? The biggest opportunity for Disney lies in India and their massive fans of superheroes. Having the lowest cost among streaming services might be an added advantage. The possible threat to Disney however is their content, it is mainly directed at younger crowds , do they adapt to broader content or stick with the same? Should other streaming services like prime, HBOMax start investing more on content to attract audience?
The streaming wars has basically begun and as a consumer we might have to pay for multiple services exactly like cable connections! With the pandemic of 2020 it is an opportunity for streaming services to pull up their socks as more people wouldn’t want to go to a movie theater and just watch a movie at home. It is interesting times in this industry moving ahead and it won’t be surprising if we some streaming services merge.
