Unraveling the Myth of a Winner-Takes-All Streaming War

The streaming industry is widely considered to be an oligopoly as roughly eight premium subscription video on demand?(SVOD) services all hold significant market power: Netflix , Prime Video & Amazon MGM Studios , Max, Disney Streaming 's Disney+, Hulu , Paramount+ , Peacock and 苹果 TV+. Netflix is the market-leader by a wide margin, across a number of statistical categories, and its dominant position won’t be threatened any time soon. Yet even as consolidation in the streaming industry is inevitable and the number of major players will winnow over time, we aren’t careening toward a monopolistic market structure any time soon. In other words, the so-called?“streaming wars” won’t end with one victor emerging from the Battle Royale. Instead, there will be several.?

Outside of the traditional pay-TV bundle, it’s incredibly difficult to solve for every one of the modern consumer’s entertainment needs in one digital destination, particularly after years of industry fragmentation. For as successful as Netflix is, claiming the vast majority of subscribers, revenue and demand within the market on an endless basis is too lofty an expectation — even for the starry eyes of Hollywood.?

By exploring the various streaming goals at play, the market’s increased competition in recent years, various attributes of competing services, and audience demographics, we can clearly see how the streaming industry is not a winner-take-all scenario?(despite what recent headlines suggest).?

Changing Goals

In 2012, former Netflix CEO Reed Hastings said that cord cutting battles are?“not really in our interest” and?“our view is to be complementary” to linear TV. In 2015, current Netflix co-CEO Ted Sarandos said the company’s?“goal is to become HBO faster than HBO can become us.”

In 2022, Hastings stated that?“it’s definitely the end of linear TV over the next five to 10 years” and earlier this year Sarandos boasted that?“no one before Netflix has had this kind of reach.”

At first glance, these comments may appear somewhat contradictory. Yet this isn’t a criticism of Netflix. It’s merely an acknowledgment that goals change as markets evolve and companies develop. Netflix shifted from complementing linear TV to usurping it; from aiming for the premium prestige of HBO to emphasizing broader?“gourmet cheeseburgers,” as Netflix’s Chief Content Officer Bela Bajaria described it.?

Today, Netflix very much leans into its identity as the largest global TV network in the world, which it has earned. But as a content provider rather than an ecosystem aggregator/bundler such as 亚马逊 , 谷歌 , Roku , Samsung, etc., replacing TV entirely is perhaps unrealistic in a strict sense. Netflix simply isn’t designed to own the end-to-end consumer experience in that way.?

Multiple streamers can co-exist at once and the average SVOD subscriber now pays for 4.2 services, according to a?JPMorgan survey . This is especially true as they all attempt to provide what consumers value most about the pay-TV bundle: a collection of sports, news, scripted and unscripted programming in one central location for one price?(more on this later). But most important is the reality that these companies are all deploying various strategies to reach a variety of different goals.?

Initially low prices for major new SVODs that launched across 2019-2021 positioned these new entrants as supplemental to Netflix as opposed to straightforward replacements?(Peacock launched with a free tier, after all). Apple TV+ is designed to add value to the Apple One bundle, boost the company’s emphasis on services and help juice product sales. Prime Video provides an extra benefit to Amazon’s core Prime subscription that relies more on retail sales. Nearly 70% of Netflix’s total subscriber base comes from outside the US while roughly 80% of its quarterly subscriber additions are now international. At the same time, Paramount Global and NBCUniversal partnered on European streamer SkyShowtime , Warner Bros. Discovery shuttered streaming service in a handful of European countries, Disney opted not to shell out big money for IPL rights and is?reportedly selling off its India assets, and Hulu remains a US-only service. Global just isn’t every competitor’s primary objective at the moment and Netflix is the only pure-play streamer of the bunch.

All of this suggests that there is room for more than one streaming success story given the various ambitions and tactics at play, many of which run parallel to one another rather than intersect.?

A Competitive Landscape?

In the US, the world’s most competitive streaming market, Netflix is absolutely the top streamer by a wide margin. But that doesn’t mean it’s the?only?streamer achieving success.

The total catalog demand share data, which takes into account both licensed and original TV series and movies available on a platform, is a good indicator of which SVODs consumers are most likely to use as a default streaming home. Unsurprisingly, Netflix ranks first in the US as of Q3 2023. Yet its 17.3% share actually represents a drop off from the same quarter last year?(18.2%). Max?(15.4%) and Hulu?(15.3%) are just a stone’s throw away.?

With Hulu being integrated into Disney+, the combined super service would account for a whopping 24.4% total catalog demand share, easily besting Netflix.?(Both services are already among the stickier streaming options when it comes to churn and the ongoing combination will help with habitual engagement, though the underlying tech raises some questions). Also note that even as Netflix’s movie demand share?(7.3%) tops the list, the streamer has the largest gap between series and movie demand shares of any major player. This opens the door for consumers to rely more on services such as Max and Prime Video for specific movie needs.?

So we know TV series drive significantly more demand for Netflix than movies and we also can see a path in which the combination of Disney+ and Hulu might challenge Netflix as the first entertainment access point in the living room. That’s a helpful start in understanding Netflix’s strengths as well as evolving market factors that push back against the notion that streaming is a winner take all scenario. Netflix’s prodigious library sets up a pathway to scrolling search discovery for viewers while Disney+ is more defined by its event series. Both satisfy consumer needs in different ways.?

If we move from the more macro total catalog demand to the more micro focus on originals?(which help to drive subscription growth), another trend emerges: Netflix is losing share.?

Netflix’s share of global demand for original series continued to hit new lows in Q3, sitting at 33.3%. This marks a 20% decline from Q3 2020?(53.5%). At the same time, Netflix’s supply share of global streaming original titles has steadily ticked down since 2020, as new competitors entered the field, falling from 33.1% in Q1 2020 to 25.3% in Q3 2023.

Looking at the supply share of new premieres during each quarter, the impact of Netflix’s increased competition is even more stark. As recently as Q3 2021, Netflix accounted for 30.2% of all new streaming original titles released globally. Fast forward two years and Netflix’s share of new streaming originals worldwide is down to 14.7%. Each quarter in 2023 has seen Netflix’s supply share of new streaming original premieres drop below 15%.

Again, this isn’t totally unexpected given the rise of fresh competitors, the production stoppages of the 2020s thus far, and a general pull back in content spending industrywide. Yet it underscores the increasing parity across the industry. Netflix may be the only consistently profitable streamer, but as the volume and quality of content from rivals continues to increase, it helps strengthen long-term rival positions. And since we know Netflix relies more on TV than movies, the decline speaks volumes about what consumers are seeking out in streaming and why that can support more than one major SVOD service.?

Supply and Demand Battles

The streaming wars are not defined by total library size, otherwise well-stocked FAST services such as Tubi and The Roku Channel would be winning. Netflix has the largest US SVOD library by far. But raw scale is no replacement for quality of content and the ability to elicit meaningful audience demand. Without it, large libraries can be like empty calories on a diet.

While Netflix has deliberately established itself as a one-stop-shop for all audience preferences, the sheer size of its library has led to the lowest average demand per title?(both movie and show) among the major players at 2.23x as of October. The looming combination of Disney+?(5.62x average title demand) and Hulu?(3.94x) boasts both the second largest library by total titles and a significantly better outlook from an average title demand perspective.?

Netflix?(50.9%) boasts the second-highest audience demand share for originals behind just Apple TV+. However, the concerning element here is that Netflix‘s supply of streaming originals?(64.1% of its US TV library) far outstrips its demand by the largest margin of all eight major streamers. This reflects the difficulty in relying so significantly on original production — audience taste is an inherently fickle and unpredictable element — which will remain Netflix’s primary focus even as the licensing market heats up. Perhaps it’s not a surprise that Netflix’s average demand for original shows has been declining since a pandemic-inflated spike in early 2020, from 2.7x to around 2.0x in 2023.

In August, Netflix US released 45 new TV titles (both licensed and original), per What’s On Netflix. Despite its sizable domestic library, just 8.02% of its catalog accounted for 50% of its total demand that month. More than half of the library’s demand was concentrated among a relatively small collection of titles. Even as entertainment has always been a hits-driven business with the home runs compensating for the strike outs, a more equal distribution of demand throughout the library would be ideal for a $17 billion annual content budget.?

Outside of originals, non-exclusive licensing — such as?Suits and the recent additions from HBO — are punching far above their weight for the company as such shows account for just 7.4% of Netflix’s TV supply, yet nearly 25% of its demand?(a slightly larger demand share than exclusively licensed content at 24.4%). Prime Video represents a similar case in which exclusive licensing comprises a significantly higher percentage of its library supply, yet the demand share for non-exclusive licensed content is much higher. This suggests audiences enjoy having multiple access points to a given title rather than disconnected walled gardens.?Suits, which is streaming on Netflix?(eight seasons), Peacock?(nine seasons), and Amazon?(one season) is an interesting example. More than 30% of those that watched?Suits?then watched a show on Hulu, 20% went to Max and 15% stayed on Netflix, per Parrot Analytics consumption data. Even as Netflix is the driving force behind the show’s resurgence, viewers still tend to hop around to a degree.

In general, licensed shows maintain immense value in streaming. Licensed exclusives represent the largest supply share?(59.6%) and demand share?(52.2%) for Disney+ while licensed series?(exclusive and non-exclusive) account for the majority of demand across all major streamers except Netflix and Apple TV+. Without acquiring an outside library, Netflix doesn’t have the benefit of decades of content development as its legacy media rivals do, which is why it expends immense resources in developing its own.?

Working in Netflix’s favor is the fact that the licensing market is heating up again after years of in-house consolidation.?“What has happened is that the availability to license has opened up a lot more,” Sarandos said recently.?

However, this strategy does leave a library susceptible to rising licensing costs?(Netflix spent?$100 million to keep?Friends?one additional year before HBO Max launched) and the eventual loss of content. Slow as it may be, the march toward consistent free cash flow for major streamers will likely result in strategic changes at a certain point. Should a rival SVOD reach steady profitability, executives may once again adhere to Disney CEO Bob Iger’s now famous comment likening licensing to Netflix to?“selling nuclear weapons technology to a Third World country, and now they're using it against us.”?(In a sign of the current difficulties facing Disney, Iger has done a 180 and is licensing 14 titles to Netflix, though will not be selling anything from the Marvel, Star Wars and Pixar pillars).?

Bottom line: Netflix is immensely successful, but not without its own set of challenges that represent potential weak points in the present or future obstacles?(as all streamers face).?

Giving Consumers What They Want

Netflix is a leader in many categories, but there are programming areas in which other services may better satisfy consumer needs.?

As mentioned above, one of the core attraction points of pay TV was its collections of live news and sports along with scripted and unscripted movies and TV shows. Streaming has yet to figure out news in a meaningful and consistent way while live sports access is almost single-handedly keeping linear TV alive at the moment.?

Netflix has enjoyed some success with sports docu-series such as?F1: Drive to Survive?and?Quarterback?and it is experimenting with live sports exhibitions such as?The Netflix Cup?and an upcoming tennis match between Rafael Nadal and Carlos Alcaraz. But sports-adjacent programming and non-essential sports broadcast rights may not be enough to make a dent in streaming, where sports supply is increasing but demand is relatively steady. That is to say, none of these forays remotely have the cultural imprint of live college or pro football, basketball, etc.?

Meanwhile, Netflix’s forays into talk show and news comedy formats such as?Chelsea?and?The Patriot Act?have not sustained interest over the long haul. News and sports are essential to?“replacing” TV and Netflix has a smaller news demand share?(0.1%) than Apple TV+, Discovery+, Hulu, Max, Paramount+, Peacock and Pluto TV. While its sports demand share?(4.3%) — which doesn’t take into account live sports rights — sits behind just Apple TV+, it’s roughly on par with Peacock?(4.2%), which has a war chest of live sports rights that rivals even ESPN to pair with its sports-adjacent programming.?

Within scripted, we know Netflix’s demand for comedy and kids programming outstrips its supply. However, a smaller percentage of shows within these genres account for at least 50% of genre demand. This reinforces how top heavy and tightly concentrated Netflix’s library can be despite its size.?(Though this is not necessarily a problem unique to Netflix as Warner Bros. Discovery CFO Gunnar Wiedenfels previously?noted that?“a small percentage of titles really drives the vast majority of viewership and engagement“). The downside of a top heavy library is that it leaves you vulnerable should the fresh delivery of original content be halted or endure an extended creative cold streak.?

What also suggests more parity in the industry is overlap and disparities between streamers.?

Thanks largely to Nickelodeon, demand for children’s entertainment and animation outstrips supply on Paramount+ by 2.8% and 3.6%, respectively, providing solid direct competition to two areas Netflix also looks to excel in. Paramount+ has also built a foundation of procedural and crime dramas that would induce envy in most Hollywood execs, with demand for the drama genre outstripping supply by a healthy 12.7% on the platform.?With shows such as?Game of Thrones?and?His Dark Materials, Max has a positive gap between demand for fantasy dramas and supply while Netflix has struggled in this realm?(my condolences to fans of cancelled Netflix fantasy shows?The Dark Crystal: Age of Resistance, Cursed, The Irregulars,?Fate: The Winx Saga,?Shadow and Bone?and more). Hulu does extremely well with comedy?(12%) and animation?(5%) — especially Japanese animation — which are all areas Netflix has invested in as well. Disney+ and Amazon succeed with superhero series while Netflix no longer houses Disney’s Marvel shows and saw hopeful superhero franchise-launcher?Jupiter’s Legacy?fail to ignite.?

In fact, Netflix might be stretched too thin in drama?(-0.5%), reality?(-2%), documentary?(-7.2%) and romance?(-4%) while still performing well in comedy?(10.3%), children?(8.6%), animation?(11.1%) and science-fiction?(8.2%) as it pertains to demand vs supply. These represent programming areas where the streamer can consider reducing or increasing investment.?Simple as it may be, all of this is further evidence that a number of streamers can also help satisfy audience preferences that Netflix is both targeting and perhaps not as focused on.

Ultimately, what consumers want for streaming services lays the groundwork for a continuously competitive landscape.?

“Cost is key...frankly, I think this speaks to the greater economic uncertainty felt by Americans right now,"?said Mallory Newall, vice president of public affairs at Ipsos, which conducted an NPR poll into what audiences most value when signing up for SVOD services.?"At the same time, these users are signaling there's such a thing as too much choice....The most attractive thing a streaming provider can do right now is be price-sensitive while also continuing to offer great content. And it's a bonus if they make it easy for their users to navigate their library or to bundle with other platforms.”

Netflix, as many services are doing, has raised prices for its standard and premium tiers?(and sunset its basic package) in order to spur conversion to its still embryonic ad-supported tier. At $15.49, its standard ad-free package is among the most expensive premium SVOD tiers. Still, most major services are providing respectable bang-for-their buck when it comes to total catalog demand vs. monthly cost. In other words, the ad-free versions of the Disney bundle, Netflix standard, Max, Paramount+ with SHOWTIME , Peacock Premium Plus and smaller services such as Discovery+, AMC+ and Crunchyroll all remain good values for consumers.?

Even as Netflix eyes a something-for-everyone strategy, it still over-indexes with female audiences and Zennials while services such as Apple TV+?(Males, Gen X+) and Disney+?(Males, Zennials) serve slightly different audiences, per Parrot’s audience demographic data. The point being that without all of the programming of pay-TV housed under one roof, there is naturally going to be segmentation between streaming platforms and audience demographics. We’re in a decentralized era of programming which creates several viable paths and demographic clusters.?

It isn’t that Netflix is failing after years of market domination — they are not the New England Patriots of the entertainment industry right now. It’s more so about the competition getting tougher, vast and eclectic audience tastes being difficult to provide in a single service, and content resource allocation by genre being difficult to nail down. Add it all up and you can see how challenging it is for any one company to?“win”?(just as the market supported more than one cable company during pay-TV’s heyday). Yes, consolidation will come for streaming in the coming years through voluntary opt-out?(Sony), involuntary opt-out?(Quibi), and general merger and acquisition activity. But when the dust finally settles, it certainly won’t leave just one SVOD gladiator still standing, no matter how powerful Netflix is.