Netflix

A lot of companies (Apple, Disney, Warner Brothers, etc.) are planning on launching their own streaming service within the next 12-18 months to compete with Netflix. My guess is execs at these companies looked at the profit margins Netflix was getting on content belong to their companies, started seeing dollar signs, and figured, “Hey – we can do this and make boat loads of money for ourselves!”

However, in arriving at the conclusion that they should launch their own streaming service in order to achieve massive profitability, I think these companies missed the point regarding what made Netflix so popular in the first place.

Judging by the (almost daily at this point) press releases announcing the flow of content off of Netflix and onto rival streaming services, and coupling that with the parallel flow of press releases announcing various reboots and original series exclusive to various streaming services, it seems clear that most execs and their companies think the value proposition of Netflix is content; namely, you watch Netflix because of the shows available on Netflix.

However, let’s be clear: consumers don’t use Netflix because it has the most or even the best content. As proof, just look at Amazon Instant Video (now Prime Video, I think?). For many years, it has had a much, much larger catalog of on-demand programming that consumers can either rent or purchase. But everyone has historically used (and talked about) Netflix. Why?

Netflix’s Secret Weapon

Put simply,

Consumers enjoy and have used Netflix because, historically, Netflix has been the most convenient way to access the broadest range of movies and TV shows at the most reasonable price.

In a nutshell: Convenient selection for the best price is why Netflix “won” the streaming wars and why it’s made so much money.

The Dark Timeline

In contrast, consider a world (ours) where streaming services are offered by:

  • Apple
  • CBS
  • Disney
  • HBO
  • Hulu
  • NBC
  • Warner Bros
  • Chip and Joanna Gaines??

The all-important convenience factor greatly diminishes the more fragmented the streaming market becomes. For example, and starting in the next few years unless something major changes, if you want to stream The Office and Friends (two of the most popular shows on Netflix), you’ll need to pay for NBC’s streaming service as well as the Warner Bros streaming service (respectively). Contrast this with the fact that, previously, you could just pay for Netflix and watch either show at your leisure.

More importantly, this loss of convenience isn’t constant – its exponential. Consider that each new streaming service a consumer subscribes to comes with its own monthly fee, its own username and password, and its own app or apps each with a UI different from all the other streaming services. More streaming services = More problems, more hassle.

The Future is Grim

Given that we live in the darkest timeline where the best days of cord cutting and streaming are most likely behind us, how will all this play out?

Disney

My guess is Disney’s streaming service will do alright. They have a large and diverse portfolio of brands and franchises, parents have proven that they will always be willing to pay for Disney, plus Disney+ is pricing itself low enough initially that they should attract a portion of the current non-consumption market meaning a high subscriber count at launch. So yeah – they’ll probably do OK. And I can’t argue that Disney+ doesn’t make business sense. However, it does signify to me that yes, the golden days of streaming, where you could kill a $150/month cable subscription with a $30/month Netflix + SlingTV subscription, are indeed behind us.

Amazon

Amazon already attracts a lot of eyeballs via its Prime movie/TV show offerings, and they tend to hide their original programming behind a paywall with a number of other benefits (Amazon Prime), so my guess is they’ll also continue to chug slowly away and do a decent little side business/value-add to Amazon Prime with their streaming service.

Netflix

Netflix¬† will see its subscriber base shrink for sure, but I don’t think it will ever go away completely.

When these various companies pull their content off of Netflix, it’s highly unlikely that the majority of these new services will either:

  1. bring enough former-Netflix customers with them, or
  2. attract enough new customers

to warrant the price tag of running their own streaming service. However, what they will successfully do is decrease the attractiveness of Netflix for most consumers by dethroning Netflix, making it so that Netflix is no longer the most convenient place to get the largest amount of content at the best price.

In the long run, Netflix will most likely either get absorbed by some other tech giant or limp slowly along on its past momentum, much like Facebook and Microsoft have/are.

Everybody Else

As far as the other streaming services go, my guess is 80-90% of them won’t succeed. The ones that have a shot are those that are niche enough to attract a loyal following, but even then unless they’re constantly either creating or adding new content, how long can they hold on to subscribers? My guess is the “get a free trial and then cancel before the first bill” dance will be a problem that plagues these services.

Rent vs. Own

And how long before consumers begin to realize that a $12/month subscription fee will pretty quickly pay for every season of The Office or Friends on DVD, Blu-Ray, or a streaming platform like Amazon where you can “own” a show [1].

Consider:

  • There are 9 seasons of The Office.
  • Let’s assume each season is $20 to own in HD on Amazon Prime Video.
  • That means that a $12/month subscription fee will buy all 9 seasons of The Office in 15 months, or a littler over a year. (This time-frame is similar or even reduced if you simply purchase The Office on DVD or Blu-Ray.)

Thus, if all you’re watching on the NBC streaming service is The Office, savvy consumers will eventually start to realize that it’s much smarter to invest in owning a series and eventually save themselves that $12/month on a service they don’t otherwise really care about.

It’s pretty much rinse and repeat with the occasional free trial or 1-2 month subscription to catch up on new season of a few select shows on say Netflix or Hulu. In the long run, will there ever be a reason to leave a Netflix or Hulu subscription running for 12 months when you can binge the latest seasons of a few select shows in 1-2 months and save that money until the next slew of releases land?

The Good Ol’ Days

I guess someday we’ll all tell our grandkids about the good old days in the early 2010’s when there were more than 8 corporations in America and you could pay for one streaming service and watch pretty much any show you wanted. They’ll marvel, ask if the shows were in color or not, pat us on the head, and then, hopefully, go back to reading a paper book or playing Kings Quest III or Myst in VirtualBox.


Footnotes

[1] I put own in quotation marks here in acknowledgment of the comments on this post pointing out that your ownership of a particular Amazon title is ultimately something that Amazon can revoke. However, this deserves its own post, and for our purposes let’s just say Amazon plays nice, something that is definitely in its best interest if it wants to keep selling you movies and TV shows (it does).

4 thoughts on “Netflix”

  1. I’d argue having more competition is a very good thing – though the big issue is that as the licenses are diversified, price needs to come down to reflect that. There also needs to be an easier way to watch these services – I’m writing up a blog post about just that right now.

  2. The most convenient way to watch TV, is… to watch TV. I have this box, which requires no apps or subscriptions whatsoever. I just plug it in and have a few hundred channels to choose from. If I want to watch something “on demand”, I just set it to record when it’s on and watch it at my leisure. This is where streaming services fall down. Netflix was popular because it was just like good old-fashioned TV, except that you, the viewer, controlled the programming. If we are to have the situation of numerous competing streaming services, they should offer the pure streams in an open format, so that anyone can use the same piece of client software to view whichever stream they have subscribed to. Something like the video equivalent of RadioDroid and other internet-radio clients.

    I find it completely bizarre that you use the term “own” to refer to programs on a streaming service (i.e. to “own” a box-set on Amazon Prime video. You never truly own it: You are entirely dependent on the service allowing you to stream it from them. If they lose the rights to stream it, or decide that you no longer have the right, or simply cancel their streaming service completely, you no longer have anything to watch. This has happened multiple times with devices such as the Amazon Swindle, which has documented cases of remote-deletion of books people had “bought”. Apparently Malwarespy, the Redmond company responsible for the most widely-used PC operating system on the planet, are closing their e-book store, too. When that goes, so will any of the books their customers “bought” in it… This is one of the reasons I always buy the physical copy: the paper book, the CD/LP, the DVD/Blu-Ray… As long as I still have the equipment to play it on, I can still watch VHS tapes from the 80s/90s, and my DVDs from the 2000s. They still work when you don’t have an internet connection. And I can rip them to a Theora or WebM file to play on any of my devices, even when I don’t have an internet connection.

    Often, I think both people and companies jump on the “streaming” bandwagon without thinking about the fact that most implementations are actually restrictive and unfair on the viewer, and that streaming is often a step backwards, not forwards. I find it quite amusing that one of the unique selling-points of the “Now that’s what I call music!” app, is that you can – gasp – listen to your music offline! How revolutionary! My Sony Walkman could do that in 1983. Just sayin’…

  3. People left cable for streaming because it was cheap, you could pay for Netflix and Hulu and have the same viewing experience of those on cable, but now streaming is fragmented and in many ways more of an expense than cable ever was. In light of this and a complete lack of any viable alternatives with lower costs, the only thing this separation will do is bring online piracy roaring back into a new golden age, if it hasn’t already.

  4. All the streaming services above are costly, Amazon is a waste of brain cells. I cut the cord two years ago. What made me do it was the “broadcasting fee” Something that you can watch for free over the air by antenna. I use a IPTV service on a droid tv box. I pay for the internet hookup and the IPTV service that cost a fraction of the above services, and get so many channels. If you don’t mind a little buffering every now & then. Why loose cable If your subscribing to more than two or three services that cost the same or more than you paid in the first place?

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