Shortcuts / 21 September 2022

The future of streaming

It wasn’t that long ago Netflix was that shiny new thing we all went crazy for, but huge competition from other streaming services and a bit of audience fatigue with its shows means the gloss has come off. So in this Squiz Shortcut we take a look at the extraordinary rise of Netflix, who’s who in the current world of streaming, and how all this competition might shake out.

Why are we talking about this?
Well, Netflix has started losing subscribers, and that’s notable because it has been up and up for the innovative 20yo entertainment company. It’s seen the company shed staff and cancel some shows.

So is this the beginning of the end?
Don’t write it off quite yet… Netflix is a $100 billion company – it’s just that at its peak, the market valued it at about 3 times that. COVID gave Netflix a huge boost with many of us cooped up at home, so what we are seeing with that drop in subscriber numbers is a return to pre-pandemic levels.

Take me back to how Netflix got so big…
It’s a phenomenal story. Free-to-air TV was really it until the end of the 2000s. Iconic shows like FriendsBeverly Hills 90210, and Melrose Place were appointment viewing every week. You’d race home just to watch – no binge-watching or on-demand.

There were DVDs…
Yep. And that’s how Netflix started – it was a DVD-by-post service trying to give the big chain Blockbuster a run for its money. It sounds quaint now, but it was quite revolutionary at the time.

How did Netflix get into streaming?
As more people got hooked up to the internet, Netflix started offering all-you-can-watch movie packages for computers. It started streaming in 2007, but the real breakthrough for the whole industry came in 2013 with the release of Netflix’s first original content series – House of Cards.

What a show…
It was pretty transformational. It was the first time one season of a new show – all 13 episodes – was available to watch all at once if you wanted. That took away the whole concept of appointment viewing. And it was a big deal for Australia, too, because American TV shows would only be released here well after their US launch.

Now pretty much everything is a global drop…
Streaming has definitely changed everything. But Forbes says the market is “the Wild West” right now, with more than 200 competing services around the world.

Like who?
Heard of Curiosity Stream or Tencent? What about Youku or Peacock? Those 4 are in the top 15 streaming services globally. And then there’s Crunchyroll…

Yep – if you’re into Japanese anime, Crunchyroll is for you.

Where does Netflix sit?
It’s still the biggest fish in the streaming pond. Going by the latest subscriber numbers, Netflix has 220 million subscribers, then comes Amazon Prime with 175 million viewers, Disney+ at 150 million, and Tencent – focused on the Chinese market – has 125 million subscribers.

What about in Australia?
We’re big into streaming – we have the same top 3 as the rest of the globe, but what’s fascinating is how fast some of the top 10 are growing.

How fast?
So Netflix actually bucked the global trend and grew in Australia by 4%. But Prime’s growth was 10 times that at 44%, and Binge – which came in 6th on the Aussie list – had 53% year-on-year growth. And Paramount+ has come from nowhere to #7 with more than one million subscribers here.

No wonder Netflix is worried about the competition…
Yep, and that’s why the company is starting to talk about a subscription offer with ads. They need to stop bleeding subscribers, and getting that revenue stream from advertising means they can offer a lower monthly price.

So subscribers could get a cheaper deal?
That’s right. So you might be paying $6 or $7 a month rather than $10 to $23 – but you’ll have to put up with a few ads.

What about the elephant in the room?
What’s that?

The cost of living crisis…
Oh, you’re wondering if everyone will keep paying for all these subscriptions? It’s a good question that’s being asked all over the world. There are something like 200 streaming services globally and 30 platforms competing in Australia. If we look at what’s happening in the US, it’s likely we’ll see some fall over, and there’ll be some mergers.

What does that mean?
In the US, Disney+ is now offering a package where you get a special price if you add in Hulu and ESPN+. Those 2 are pretty big streamers in their own right, so there are deals to be done.

Is anyone else hooking up?
That’s a bit forward… Amazon Prime has snagged one of the big cable TV networks in the US, which will allow it to air Thursday night NFL games in America. It’s a huge deal that proves how big sport is, and we can expect more of those sorts of tie-ups in Oz.

Where does this all leave free-to-air TV?
Look, people have been declaring TV dead for a while, but as Elton John sang, it’s still standing. One note of caution: there was some US data out last month in the US showing Americans watched more minutes of streaming than live TV in July.

That’s never happened before?
No, so it’s a big moment.

Now I think about it, all the award-winning shows are from the streamers…
That’s right – the big US networks used to dominate, but now it’s all content from the streaming platforms. At the recent Emmys, HBO Max cleaned up with The White LotusSuccession and Euphoria. Apple TV got a bunch of awards for Ted Lasso. And Netflix did well with Squid Game.

So much to binge-watch…
There sure is, but unlike Netflix, many of the streamers are already going back to weekly releases for many of their big original shows to keep subscribers on board for longer. The internet’s recently gone wild with speculation a hit Netflix show like Bridgerton could just become a once-a-week drop. But there’s been nothing concrete from Netflix on that.

And the ads are coming…
They are, and it’s something we’re likely to see a lot of from the streamers. Paramount+ and Amazon Prime are already using a hybrid model, and Disney+ is about to offer an ad option. Meanwhile, Foxtel’s been doing it for years.

So I guess they’ve figured out some viewers are ok to take a few ads for a cheaper deal?
Yep, that’s the plan. Now excuse us while we watch just one episode of the new show we watching…

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