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 for their kids, 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 for 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 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.

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?

Rent vs. Own

And how long before consumers begin to realize that that $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.

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.

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.