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The game is changing – the next generation of the streaming wars will be about stopping churn, consolidation, and bundling as subscriber growth slows.
“The streaming wars are over because subscriber growth has come to a halt,” Michael Nathanson, a media analyst at MoffettNathanson, told CNN Business, “You’re fighting a war in a land that has no more resources in it.”
Let’s start off with a little history.
Netflix launched in 1998 as a DVD rental company, and by 2012 had evolved into the world’s first and only streaming platform creating original content. They effectively redefined the way the world watched television and movies at home, becoming an existential threat to legacy media companies and ushering in a new era of content delivery.
In 2019, Disney debuted their streaming offering Disney+, rivaling Netflix for the first time. With the subsequent rise of Amazon Prime Video, Apple TV+, and HBO Max in the mix, the “streaming wars” were in full swing as services began competing for subscribers in an all-out land-grab. Media companies began investing millions in original content to entice users to sign up or switch from other services. And until last year, Apple, Amazon Prime, Netflix and Disney+ were the only providers not offering ad-supported options.
Netflix and Disney have entered the ad game
In November 2022, Netflix rolled out its ad-supported offering at $6.99 a month (just a few dollars less than their most affordable option at $9.99) to mixed reviews across the industry. At launch, solutions for advertisers were limited – targeting was broad, inventory wasn’t offered across all programs, and pricing came at a premium. But despite these limitations, demand was so high that Netflix only delivered on 80% of guaranteed impressions, refunding clients the rest.
In December 2022, Disney+ followed suit, offering an ad-supported option at $7.99 – a dollar more than Netflix but the same price as their previously ad-free version (bumping the ad-free tier up to $10.99). The launch was US-only to start, with plans to expand internationally in 2023. Disney is focused on a more kid-friendly approach, keeping adult-oriented ads off the platform all together, and not allowing commercials at all on Disney+ Kids or on pre-school profiles.
Targeting capabilities will differ between the two
Disney+ targeting is currently limited to three options: A18+, Audience 17 and under, and Younger Kids content. All campaigns run ROS (run of schedule) with no options for genre or content targeting. And because Disney also owns Hulu, starting in April, Disney+ advertisers will have access to Hulu’s age, gender and geolocation targeting, and all other bells and whistles by July. Additionally, Disney has announced a partnership with EDO, giving them the capability to provide outcome-based measurement metrics on viewing like search and site visits.
Netflix is in the process of evaluating expanded targeting and sponsorship opportunities for its offering. Simultaneously, they are looking at restricting the number of shared passwords and accounts (it’s estimated that over 100 million people currently share passwords) meaning high potential for subscriber growth. However, after initial backlash to the announcement they’ve slowed the rollout to just a few countries to begin with.
Rumble of the bundles?
So why are the streaming wars ending? Because the game has changed – it’s no longer about driving subscriber growth on individual platforms, but instead slowing and stopping churn. The next generation of the streaming revolution will be one of consolidation and bundling – hence “rumble of the bundles” being murmured across the industry. It’s no surprise that while Disney+ raised their prices, they didn’t touch the premium bundle (Disney+, Hulu, ESPN) – incentivizing consumers to sign up for the slate of services instead of just one. Similarly, Warner Bros just announced the merger of HBO Max and Discovery+, bringing the consolidation offering “MAX” to customers in 2024. And finally, Paramount is combing Paramount + and Showtime into one app.
The birth of Streaming allowed millions of viewers to expect premium ad-free content for a bargain price – an unsustainable situation from the start, according to Nathanson. “Wall Street paid companies for subscribers, and because it paid companies for subscribers, they didn’t care about the economics,” he said. “They were willing to do whatever they could to chase subscribers.” In other words, the grow-at-any-cost strategy could never last, and now companies and Wall Street are looking at balance sheets with more focus on profitability than sheer scale.
Even though consumers are going to pay higher prices, the reality is that there’s nowhere else for them to go. Streaming is here to stay – it’s the focus of Hollywood and how millions watch content every day. That behavior isn’t going anywhere, even if marketplace and business strategies change. “Video remains the most popular leisure activity in the world,” Matthew Ball, CEO of Epyllion said. “Streaming may change, but consumers will adapt. They love video too much.”