Just in time for the launch of two new streaming services from Disney and Apple, video on demand (VOD) has gone from golden age to a state of buffering.
Buoyed by a growing appetite for more media options with even more convenience, streaming services at-large have ballooned in presence since music player and file-sharing-juggernaut Napster launched in 2001. VOD in particular, meanwhile, transformed from the moment Netflix evolved from a small company offering mail-in movies to a zeitgeist-y streamed-media platform in 2010. The company’s total paid subscriber accumulation, worldwide: 151 million, as of July.
But now comes a seeming period of stutter and, just maybe, clutter.
Netflix, despite its well-documented success, forecasted an additional 5 million subscribers for Q2 2019 and landed uncomfortably far from the bullseye, netting just 2.7 million instead. Shortly after, it lost its claim to “Friends”—one of its most streamed shows—to HBO, which will launch premium-tier-streaming-platform HBO Max in April 2020 (as part of its acquisition by WarnerMedia), with exclusive rights to the NBC sitcom. All as Apple rolls out its Apple TV+ service that’s live as of Nov. 1, and Disney, most notably, debuts Disney+ on Nov. 12, adding more noise to the existing cacophony.
Changes are coming in the streaming world. And, with those changes, some growing pains.
“There’s going to be a great shakeout occurring,” predicts Peter Fader, a professor of marketing at the Wharton School who studies customer behavior and sales forecasting. “On one hand, I’m heartened by this move toward subscription models and the creativity firms are showing, but also scared by the combination of arrogance and stupidity in different ways.”
Competitive moves and lessons to learn
While streaming services like Netflix, Amazon, and Hulu have been duking it out on televisions, mobile phones, and at the Emmys for years now, it’s only recently that industry competition is reaching a boiling point with a flood of new actors.
For Fader, when he talks “arrogance” among these subscription streaming services, he’s largely referring to newcomer Disney and its so-called history as what he calls an “arrogant content creator,” holding back on releases of movies—think “the Disney vault”—or offering them for a limited time. He argues that the subscription streaming business is characterized by access to and cultivation of customer relationships, and Disney’s ability to manage both of those tasks is, he says, “completely unproven.”
In another case that may more aptly fall under the category of “stupidity,” he cites NBC’s decision to pull content like “Friends” and “The Office” from Netflix, noting that “content may be king, but distribution is the ace.”
“You want to have your content out there as broadly as possible,” Fader explains of content distribution. “By pulling it away, you’re devaluing the content by saying, ‘You know, if you want to watch ‘The Office,’ you’re going to have to come watch it over here,’ and thinking everyone is going to go running from Netflix.
He adds emphatically: “They’re not!”
A deal was struck in June that determined “The Office” will stream exclusively on NBCUniversal’s own streaming app—set to launch in 2020, adding to the competitive fleet—and leave Netflix in January 2021. Bidding reportedly nearly reached eight figures to nab streaming rights.
It’s not the only nostalgic TV sitcom that platforms have competed for, either. In addition to HBO paying $425 million to keep “Friends” on its HBO Max platform for five years, parent company WarnerMedia further shelled out a gobsmacking billions of dollars to keep “The Big Bang Theory” on the platform through 2028.
The potential problem, Fader says, is neither of those shows—though big boosts for the platform’s competitive clout—sound very “HBO” in ethos.
“It’s good stuff, but it’s not HBO,” he says of the two sitcoms hitting the cable giant and a lesson perhaps to be learned. “And it very much runs the risk of diluting the brand both in terms of our distinctive understanding of the portfolio, as well as just the kinds of content it offers.”
Which is all to say that Netflix now sees a new flood of competition that goes beyond Amazon and Hulu, the consequence of years of having the market practically to itself—originally dismissed by broadcasters as a “passing fad,” Fader says, “too niche,” or one piece of a much larger ecosystem. Companies have only recently realized the missed opportunity of not having their own streaming platform.
“It’s become a ‘Can’t beat them, join them’ kind of thing,” Fader says.
But that change in approach, combined with slowing subscriber rates, should have Netflix at least a little worried.
“They should be constantly paranoid,” Fader concludes. “And start asking themselves not just how these other services, and the change in media landscape, is going to affect their aggregate numbers, but are their most valuable customers at risk, and what will they have to do to hold on to them. Or, more importantly, what will they have to do to continue to find new customers that will continue to bring a lot of value?”
Content is king; subscriptions are sacred
Fundamental to the evolution of streaming—and key to the wars between broadcasters and platforms—is the business model behind it all: subscription services.
Fader explains the subscription model has always been a valuable one, but had fallen out of fashion for a time as products became more dominant.
“Part of it now is just waking up on a company’s part and saying, ‘Wait a minute, maybe we should be in the customer relationship business and not just in the pushing-stuff-out-the-door business.’” he remarks.
But accomplishing that means building relationships with customers and establishing loyalty. That’s no easy task, says Barbara Kahn, a professor of marketing at Wharton who studies brand loyalty, brand management, consumer choice, and customer relationship management.
“The idea behind subscription services is to lock you in and build strong loyalty, so you stop thinking about it,” Kahn says. “Once you buy into a subscription service, the hope is that you will stay loyal and use it more. Amazon Prime, for example, has been very successful with this strategy. Prime becomes your default platform for e-commerce. Prime members generally stay loyal to the service and purchase more and more over time.”
Where subscription models could hit a roadblock with streaming, however, is the sheer number of them suddenly required to access content. It’s a reminder of why cable was so attractive in the first place: bundling.
“The problem with the subscription services, though, is that people won’t want to pay for too many subscriptions, and that might seem to be the only option now in streaming,” Kahn says. “For Amazon Prime, that’s not the case. You can get everything you want with one subscription there.”
With competitive angling for rights to shows like “Friends” and “The Office,” the heart of that battle is the goal of luring consumers with “something shiny”–a “very favorite show,” she says.
“But the question will be whether subscribers stay loyal to those particular shows and then follow them to whatever subscription they need to buy, or whether they will ‘satisfice,’” Kahn adds. “Maybe consumers will decide that they don’t need to watch the ‘best’ show, but they will want to just watch something that’s good enough.”
If that’s the case, they may choose the subscription service that offers the most acceptable options, even if it doesn’t offer the favorite show, Kahn explains.
“So, the question is whether consumers will optimize or satisfice,” she says. “If satisficing is the goal, you can purchase fewer services. It may be true that if you don’t subscribe to Hulu, you’re not watching your most favorite show, but you’re OK with that because you have plenty of content that is good enough on the services you are subscribing to.”
Where do these platforms stand on that competitive front? Among streaming giants, she says, Netflix “is in a good position because it has lots of options and also has exclusive, high-quality programing created just for its subscribers.”
Amazon, she adds, also is in a good position because of Prime Video’s association with Amazon Prime more broadly. And it, too, has exclusive content.
For content, Fader says, the ideal recipe is to accumulate the variety of content that will keep subscribers re-upping their subscriptions.
“You need those blockbusters to get on people’s radar … but you need that tail content. A big catalogue to lock people in,” Fader adds. “Your heaviest consumer who will pay the most for you keeps varied tastes. So, if you want to really hold on to them you do need quantity as well as quality.”
For writers, streaming means more hustle
Content doesn’t just make itself, of course.
Implicit in the growing pains of streaming is a new workflow for writers. Scott Burkhardt, lecturer in Cinema & Media Studies, explains that while there are more platforms, the tradeoff is that TV shows’ seasons are shorter, and for a working TV writer that means fewer weeks of actual employment and more unpaid weeks hustling to get the next job.
“Studios and networks try to keep costs down with mini rooms that last six weeks. Scripts are written in that window and then you have a showrunner or creator who produces the show without a writing staff,” he explains. “So, you have a larger number of places to sell and work, but you have smaller staffs and timeframes in which [writers] are employed.”
On the flip side, Burkhardt adds, writers are encouraged to be more creative in the new age of streaming, which is safely assumed to be a desirable effect of streaming’s new prominence.
“Most writers want to create ‘edgy,’ I would say; there’s a big difference between a show like ‘Atlanta’ versus one like ‘NCIS.’ They’re serving different audiences,” he says. “Most writers I know are interested in doing shows that are truth to power or artistically satisfying and streaming services have allowed more of that than we’ve seen in the past.”
That means platforms purchase more content that would have been difficult to sell to broadcast or cable—boundary-pushing, more personal projects. Plus, he says, the services offer up a new venue for film that comes with fewer risks.
“Netflix is not as vulnerable to a big movie bombing, because they’re a subscription service,” Burkhardt explains. “One movie not getting the viewership numbers they want doesn’t mean people will stop subscribing to Netflix. They are playing a volume game. But for a traditional studio, you can have a lot of costs wrapped up in one movie, and since studios have begun making fewer movies at bigger price points, that failure has a bigger effect on your bottom line.”
A film like “Bright,” then, or “The Irishman,” can underwhelm in streaming numbers as long as the rest of the content makes up the difference and appeals to a broad enough audience that your subscriber base does not atrophy (An aside: streaming companies like Netflix and Amazon do not release streaming figures publicly.)
Creatively, streaming has also opened the door for the development of globally—or, rather, locally—minded content.
“One thing [Netflix is] trying to do is create more local language content, and you’re seeing a boost in a lot of those countries,” he adds.
Netflix invests to draw in subscribers from other countries with more authentic content. The idea, Burkhardt says, is to find success with “international pockets.”
Still, the larger idea stands that even though the age of streaming has meant more hustle for writers, it’s also a buffet of more fulfilling work with the warming trays constantly cycled out.
The technological considerations
What’s changing alongside VOD trends is the technology that powers it, influencing who accesses these platforms and with what level of stability. It’s of special consideration to the global push toward streaming.
“There is an infrastructural limit [with video streaming],” says Rahul Mukherjee, an assistant professor of television and new media studies in Cinema & Media Studies.
More to the point, not every country around the world has widespread broadband infrastructure.
“Thinking more about South Asia or Sub-Saharan Africa, it’s the mobile phone where streaming is happening—one has to understand that part,” he adds. “And keep that in mind when thinking about limits to streaming.”
A current line of discussion surrounding that, Mukherjee says, is whether it is the responsibility of Facebook or other platform companies to invest in infrastructures or partner with mobile phone companies so that data can be more widely accessible. In India, he notes, where physical media—memory cards—is still a popular way to consume and share content, there’s an increasing tendency to use mobile phones for streaming.
“I’ve interviewed some people [in India] who earlier wouldn’t stream videos, but now they do often. Some are Uber drivers who also need data for GPS, but have an itinerant job, so there are waiting times and they would love to stream something before they go on another [trip],” he explains. “They stream more, but it’s still not unlimited. Newly emerging telecom companies like Jio in India have offered affordable data rates and made streaming reach a wider population. Other telcos, like Airtel and Vodafone, have also offered competitive data rates, and Jio as a telecom company has offered apps, making clear its ambitions of being a platform company as well.”
What may further complicate these conversations is the move toward companies like HBO or Netflix being both a content provider and a platform, raising all sorts of questions about who is responsible for what.
“The difference between a media production company vis a vis a platform company is grey now,” he says.
So, who gets pinned with the responsibility for pushing new and better infrastructure is murky at best.
“Thinking about limitations to streaming, or downloading, if you work with infrastructure or think about infrastructures, you will find everything is not seamless,” he says of current streaming quality. “There are always bottlenecks, always problems, and what seems seamless is an appearance of these wonderful interfaces at HBO and Netflix that everybody has. But if you look behind, there are breakdowns, whether in an optical fiber ocean cable bitten somewhere by a shark [or something more complicated]. Of course, there are backups and reroutes for contingencies, which then again provide an appearance of seamlessness.”
For streaming technology, it’s still early days.
“The [up to] 15-second videos of TikTok app from Chinese company Bytedance used on mobile phones are another emerging trend in streaming where one can move across a stream of videos with swipe up or down,” citing just one example of where streaming trends are going.
What’s next for VOD streaming
The future of streaming is on the horizon, and it involves more than the latest “Stranger Things” binge-watch.
For starters, expect lines to blur between art and commerce.
“We have this eternal dream of the time when commerce will be conducted through interactive television—that I can quickly find out the sweater the character is wearing and buy it on some website,” Fader says. “And we haven’t seen anything like that yet, but there’s talk about it and startups that have all failed.”
There’s also innovation in the gaming space to watch for: Amazon, for example, has already purchased popular video game streaming service Twitch and integrated it into its Prime offerings. Once-static video games like “Grand Theft Auto” have now become open-ended online worlds where content can be created inside the content—speaking specifically to a reality show staged within the game’s role-playing servers earlier this year.
There’s also the likelihood, Fader says, that the scene will turn “meta” with the arrival of so many platforms and require a platform for all of them to live.
Ultimately, this coming shakeout will determine the direction of streaming, both for audiences and the companies ever in search of profit.
“We don’t know exactly what kind of business model is most successful for profitability or consumer friendliness; I’d like to believe those two criteria align,” Fader says. “Let’s let 1,000 flowers bloom and see how it all plays out.”