Streaming Wars: What is happening as the streaming market becomes saturated?

By John Farias

For years after its 2007 launch, Netflix was the dominant force in a relatively-uncontested streaming market. According to analytics firm Sandvine, the platform’s streaming was contributing to an estimated 30% of traffic during peak internet usage just a decade ago. Today, Netflix retains its leadership in the market. But with about fifty streaming services now serving the North American market alone, the landscape has dramatically transformed. 

A few months ago, Netflix surprised analysts when its Q4 2021 report predicted a significant slowdown for the following quarter, with 2.5 million net additions as opposed to the 6.93 million figure set forth by experts. On April 19th, following the publication of its Q1 2022 report, Netflix shares plunged almost 40% after it revealed that it had drastically fallen below expectations, losing an estimated 200,000 subscribers. The company attributed the losses to a slew of factors such as pandemic-related production delays and account sharing, but primarily greater competition from other platforms. Data reported by Kantar on Amazon Prime Video, Disney Plus, and Apple TV, shows these competitors gaining ground on Netflix and cementing their positions as sources of the largest shares of new video-on-demand streaming subscriptions. 

NBCUniversal’s relatively new platform, Peacock, snagged second place in overall new sign-ups for Q4 2021, commanding 10% of the total share. However, like Netflix, the platform has recently run into trouble. Peacock has struggled in translating its many new sign-ups into financial success, raking in $778 million in earnings against $1.7 billion in losses. Part of the losses could be attributed to the fact that a substantial portion of its user base has opted for the free, ad-supported tier; a sign they do not see the value in paying for the platform’s premium content or perhaps because they are already subscribed to one or more platforms and thus wish to avoid the burden of more monthly payments. 

This practice of stacking subscriptions has become more frequent as new platforms continue to launch and existing ones battle for market share. For a long time, Netflix was the least likely to have its subscribers stack other services but was recently dethroned by Amazon. According to Kantar, Amazon Prime Video users subscribe to 2.5 other platforms on average, as opposed to Netflix’s 3. For years, Netflix spent extensive time and money pumping out new content and perfecting the personalization algorithm that its customers have grown to love. But if this trend continues, it presents an opportunity for other platforms to slowly erode the brand loyalty Netflix has built.

In order to minimize the financial burden of juggling several subscriptions, some stackers have opted to share their accounts and split the costs with friends and family. According to research firm Parks Associates, the costs associated with password sharing and piracy will reach $12.5 billion in 2024, up from $9.1 billion in 2019. So far, no platform is actively cracking down on users who undertake this practice. However, Netflix has begun exploring methods to tackle this issue such as by regionally testing a feature that would charge you incremental fees to add outside users to your account.

For the moment, it seems as if almost all platforms agree on one thing: expanding their content libraries is their best bet to stay fresh and ahead of the competition. In 2021, Wells Fargo estimated that Disney topped the list of spending by companies, investing about $30.5 billion in new projects. NBCUniversal came in second with $18 billion, Netflix third with $17.4 billion, then WarnerMedia with $16.7 billion, and last ViacomCBS with $15 billion. For Amazon, its recent $8.5 billion acquisition of MGM will allow it to instantly obtain a vast catalog of iconic intellectual property including both the James Bond and Lord of the Ring franchises. Similarly, the recent WarnerMedia and Discovery merger means that HBO Max and Discovery Plus will soon combine into one platform, offering more content than ever. 

As platforms ramp up their expansion strategies and the industry continues to evolve, only one thing is certain: only time will tell which companies will prevail in this new hyper-competitive era of streaming.

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