Netflix, and the proliferation and future of streaming

streaming graphic (1)Brian Messing, Managing Editor

 

Entertainment has come to the world in a variety of ways over the years. Originally, television came from three channels over public airwaves. Cable television changed this, with the expansion of many more channels brought into the home. Finally, now we are in the most recent era of television, the streaming service.

Originally, the streaming service was seen as something of a supplement to cable television. It was low cost-recently, Netflix was as cheap as $8 per month, and since there were so few streaming services, they could operate as an effective oligopoly. As a supplemental business, the large media companies could license content to Netflix, Amazon, or Hulu for virtually no incremental cost, and continue to distribute content through traditional avenues, such as movie theaters for movies and cable for television programming.

While this was happening, it generated great profits for Netflix, which was on the brink of being acquired by Amazon five years ago. Netflix saw its share price increase from $60 to $350 over those five years. Steaming was a key attribute in Amazon’s rise over the same period, and also gave significant profits to the four media companies that owned Hulu (Disney, Fox, Comcast, and Time Warner).

But what this period of growth for streaming companies has shown is the division between companies that produce content and companies that provide it directly to consumers via streaming.  There are a handful of media conglomerates that own most of the major movie studios, television networks, sports broadcasting rights, record labels, and publishing assets. These companies own content as we know it, the thing which is essential for a company like Netflix to be able to operate. These companies are Disney, Comcast, AT&T, CBS, Viacom, Fox, and Sony. A few of them have figured out that streaming is the model of the future, and that it is time to get in on this business.

2019 will be the year of new streaming services, and it will likely continue into 2020. Disney will launch its streaming service with a wide content library that includes the Marvel movies, most other Disney movies, and television content from ABC, as well as many movies and television shows from Fox that have been recently acquired. Netflix losing Marvel content is another example of the proliferation of streaming.

AT&T will be launching its own streaming service, fresh off of its acquisition of the Time Warner ecosystem. With access to Warner Brothers movies, all of the Turner networks (TBS, TNT, and Cartoon Network to name a few), and premium channel HBO, the AT&T streaming service also has the potential to be a must have for consumers. AT&T will attempt to balance its newly purchased content library between its HBO streaming services and the new Time Warner-focused service.

Finally, Comcast has announced that it will be launching a streaming service in 2020, approximately one year after AT&T and Disney enter the market. The Comcast streaming service will be free, but ad-supported, and will include access to the NBCUniversal library that includes Universal movies, and television content from NBC, USA Network, Bravo, and Syfy, to name a few.

There are a lot of ways that this new proliferation of streaming services could affect this industry. For one, companies like Netflix will have to pay a lot more money to keep older content that many viewers watch. For example, Netflix recently paid Comcast around $100 Million to keep the show “Friends” on Netflix. The benefit that content producing/licensing companies have is that they can make money either way over the next two years. They will either make money by licensing their content at inflated prices to Netflix or other streaming companies, or they will make money themselves with their new streaming services and cut out the middleman.

So what does Netflix have that will keep them around? Their original content is quite popular, and some people will continue to subscribe for that reason. Additionally, they have a brand that is well known and people trust, so they may be more willing to stick to what they know, rather than switch to a new Disney or AT&T streaming service. Netflix is at higher potential risk than other existing streaming companies. Amazon bundles their service with Prime, which many people justify purchasing because of the two day shipping and music alone. Additionally, Amazon makes more money by selling tv shows and movies a la carte, which won’t be going away because it also makes money for the content owners in addition to Amazon. Hulu may have issues too, but since it is owned by the content owners, they can do what they want with it. Disney will soon control a majority stake in Hulu with its acquisition of Fox.

What does this mean for streaming? We are entering a time period in which you will no longer be able to stream on one or two services. Content will be broken up across five to ten platforms, and with Netflix’s recent price increase, you can tell that it won’t come cheap. Ironically, you could see the bundling of streaming services, which is exactly what happened with cable television when that new technology came to light. Whatever the case, when you go to stream movies or tv after a long day of work, it will likely be a lot different two years from now.

 

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