This Stream Is a Flood

Services like Netflix, Hulu, and Disney+ are supposed to make watching great shows cheap and convenient. Why does it feel like we’re drowning in a sea of 800 cable channels?

ILLUSTRATION BY MARTIN GEE

The great disruption in consumer home entertainment that is now being labeled the Streaming Wars began for me almost 20 years ago.

In December 2000, I signed up for a Netflix account. Receiving DVDs by mail in those iconic red envelopes was a revelation. No more indecisively trudging the aisles of a Blockbuster to select a film, only to return home and have the noose of late fees dangling over my head. With DVDs arriving as if by magic every couple of days, Netflix freed me of those rental shackles and introduced a way to binge-watch series like The Sopranos long before that term found its way into popular culture.

As Netflix launched into streaming in 2007, then original shows in 2013, my viewing habits evolved along with the company. My purchases from Apple’s iTunes shrank, our family canceled our cable TV subscription, and shows like House of Cards and Orange Is the New Black became viewing staples. An entertainment world built around on-demand video promised we would one day have greater choice, convenience, and lower costs.

That day has arrived amid a flurry of titans rolling out video services that aim to make streaming the primary way we consume content. Except nothing is playing out as expected.

Scrolling through this infinite content on multiple streaming platforms looking for something to watch is like a return to the purgatory of Blockbuster’s shelves. Our family now subscribes to five streaming services, and it’s no longer clear that we are saving any money. With the launches of four major streaming services expected to draw a total of 20 million new subscribers this year, according to market research firm Ovum, our joy and our pain will be even more widely shared.

For better and for worse, this maelstrom of competing streaming services is the new normal. The operators of these platforms have near-limitless resources and wildly different business models that will allow them to operate as long as they want to keep funneling money into a black hole of content. The only clear financial winners are the production studios that churn out content and charge the services exorbitant prices to feed the streaming monster.

It is a glorious mess.

167 MILLION SERVED

There was no better place to see just how thoroughly the entertainment and technology industries have embraced each other than at the most recent edition of CES (formerly Consumer Electronics Show), held in Las Vegas in January. Eighty-six media companies exhibited there, an increase of 20 percent over last year. NBCUniversal’s chairman of advertising and partnerships, Linda Yaccarino, gave a keynote address, while Meg Whitman, former CEO of Hewlett-Packard and eBay, and Jeffrey Katzenberg, former CEO of DreamWorks Animation, chose the venue to unveil Quibi, their new mobile-video subscription service.

Launching in April, Quibi (short for “quick bites”) will feature videos of 10 minutes or less that target millennials on their smartphones, including projects from Steven Spielberg, Ridley Scott, and Jennifer Lopez. Quibi has raised $1.4 billion in funding from investors such as the Walt Disney Company and WarnerMedia and has a deal to be bundled with services sold by T-Mobile.

“When you look back at the great technological leaps and entertainment history, every evolution has been driven by the relationship between creativity and technology,” Katzenberg said in his presentation.

Quibi will join a long parade of new streaming-video services. Apple TV+ debuted in November, followed by Disney+, with its monster catalog of content from Marvel, Pixar, and the Star Wars franchise. NBCUniversal formally unveiled its Peacock streaming service to investors in mid-January for a spring start date. AT&T is expected to announce details of its HBO Max service soon.

All these services are taking aim at Netflix and its 167 million subscribers around the world. Netflix itself has long said that its competition is total leisure time spent, including playing video games and watching traditional TV, not other streaming services.

“It is interesting that we see both Apple and Disney launching basically in the same week after 12 years of not being in the market,” Netflix CEO Reed Hastings told investors on the company’s earnings call in October. “Fundamentally, it’s more of the same.… All of us are competing with linear TV. We’re all relatively small to linear TV.”

Many companies had been dreaming of this intersection between tech and entertainment for decades. There were the failed attempts at creating interactive television in the early ’90s. In 2001, Yahoo hired former Warner Bros. chief Terry Semel, whose plans for turning the company around included launching a paid video-streaming service that never caught on; instead, upstart YouTube took off with user-generated content before being acquired by Google.

Today, Netflix is king among the more than 200 video-streaming subscription services tracked by video-technology news site Flixed. It has managed to keep ahead of Google’s own evolving YouTube Premium efforts and Facebook’s attempt at original programming. For now, it’s also far ahead of Disney+, which in February reported 28.6 million paid subscribers—less than three months after its launch. Facebook is reportedly willing to spend $1 billion on original programming for its Facebook Watch video-streaming service, and last year it pitched advertisers at the industry’s annual upfronts for the first time. Google, meanwhile, has pulled back from spending big on originals, and its YouTube subscription service is more focused on offering ad-free access and a bundle with its premium music service.

Yet, as Hastings pointed out, global video-streaming services are projected to be used by 15.2 percent of the market in 2020, according to Statista, and are expected to increase only 1.7 percent, to 1.3 billion customers, by 2024. The conventional wisdom might assume that many of these new services are doomed or will be forced to merge. Surely not all of these entrants can attract enough viewers to be profitable. To manage the growing costs of user acquisition and content, consolidation would seem to be inevitable.

Not so. The companies entering the Streaming Wars not only have astonishing financial resources but also have different objectives. Apple wants to sell more gadgets and never has to worry about whether Apple TV+ is profitable. AT&T’s HBO Max will be bundled with other AT&T services to drive subscribers. Disney has some of the biggest franchises, which it leverages through movie theaters but also theme parks, merchandise, and even cruises. Amazon wants to attract customers to its broader e-commerce shopping options.

“The business models of all these companies are really quite different, even though people always throw them under the same umbrella and stick them in the same bucket,” says Dan Rayburn, an independent streaming-media adviser and analyst. “Where everybody’s competing, and if you throw Facebook and everybody else in there, is our time.”

NOTHING TO WATCH

An evening when our family decides to watch a TV show or a movie together often becomes a tense negotiation and a test of nerves. The person who seizes control of the remote might launch Netflix on our smart TV and then scroll through dozens of possibilities, searching for consensus. Failure to reach an accord on a selection will lead us to Amazon Prime Video, then the available Hulu and HBO content on OCS (yet another streaming service we pay for because we live in France, where Hulu and HBO aren’t offered), then maybe Apple TV+ for one of its originals or a rental.

Eventually, a grudging accommodation will be made, the program will start, and we will settle in. I have taken to making handwritten lists of shows across these services to remind myself of potential candidates for future viewing.

“That’s the problem we have in the industry,” Rayburn says. “It’s great that we have choices as a consumer. But with lots of options comes fragmentation in the market. It’s only going to get worse.”

This video-streaming buffet in our home is the future that awaits most consumers, according to Tony Gunnarsson, a principal analyst at Ovum. Netflix is a subscription-video-streaming gateway drug. “The key trend is that you begin with Netflix, and within 16 months, most people sign up for a second service,” Gunnarsson says. “And once they do that, the barrier to add another service is very small.”

What’s more, cord cutting is slowing, according to a PWC study last fall. Consumers don’t necessarily see video streaming as a replacement; rather, they see it as an enhancement of their video options. As a result, PWC reported, the average consumer was paying $76 per month for a combination of pay TV and streaming, up $5 per month from a year earlier.

As for our family, whatever money we once saved by cutting cable seems to have vanished. Every month, a household can spend up to $15.99 for Netflix, $4.99 for Apple TV+, $11.99 for Hulu, and $14.99 for HBO NOW (though that may go with Game of Thrones having ended); we have Amazon Prime for shipping, so depending on how you look at it, either we pay $119 annually (roughly $10 per month) for Prime Video or it’s free. As of yet, I don’t have the appetite to pay for sports services like MLB.TV ($121.99 per year) or FuboTV ($54.99 per month). In the meantime, I keep hoping that a truly attractive bundled offering will appear—kind of like traditional cable. Instead, the best the market has to offer seems to be a Disney+ package with Hulu and ESPN+ (both Disney properties) for $12.99. Think Baby Yoda meets Brooklyn Nine-Nine meets Major League Baseball.

“Consumers get used to paying for services,” says Gunnarsson. “I have no idea how much we pay each month at my home, and I’m an analyst and I cover this stuff.”

This audience fragmentation is inevitable. Mass viewing that created singular cultural moments was already becoming rarer, outside of sports. Video-streaming companies are increasingly able to target viewers as they accumulate more data on their habits and tastes. This is what allows Netflix to serve me up algorithm-generated microgenres like Award-Winning Historical TV Dramas and US Dark TV Comedies. Can I trust Netflix to steer me to things I genuinely like rather than its own growing slate of original programming? “We have to have the discipline to make it very targeted,” Netflix chief content officer Ted Sarandos told me in an interview for VentureBeat in 2016.

The move toward a data-driven viewing world is ripe for abuse. Google’s YouTube invests in its own original programming, but it’s also facing huge controversy as its algorithms continue to serve up inappropriate content for kids, climate-change denial videos, hate speech, and disinformation. In June 2019, Facebook reported that 140 million people were viewing content daily on its Facebook Watch video service that launched two years earlier. A few months later, Facebook agreed to pay a $40 million fine over allegations that in 2015 and 2016 it had massively inflated its video-viewing numbers for advertisers.

While the focus is on subscriptions, services like Hulu, Peacock, and Facebook Watch will also rely heavily on sophisticated forms of advertising. Even Netflix, which is advertising-free, uses my data to send me an endless stream of emails nudging me to watch some new show.

“Advertising on the internet is super advanced,” Gunnarsson says. “These systems use certain techniques to prevent people from canceling. These are not tools that people had for cable TV. It’s very persuasive.”

ILLUSTRATION BY MARTIN GEE

TALENT RULES

Apple CEO Tim Cook arrived at the Golden Globes in early January riding high on the successful launch of Apple TV+, his company’s paid streaming service offering original content, including the #MeToo-themed The Morning Show, which had scored multiple nominations. Apple TV+ has already attracted an estimated 33.6 million subscribers from 100 countries, although most are not yet paying for the service, according to research firm Ampere.

As the tuxedo-wearing Cook sat at one of the dinner tables, host Ricky Gervais delivered a brutal takedown of the new streaming era in his opening monologue.

Gervais said that Apple had “rolled into the TV game with The Morning Show, a superb drama about the importance of dignity and doing the right thing, made by a company that runs sweatshops in China.” Addressing the talent in the audience, he added, “You say you’re woke, but the companies you work for, I mean unbelievable. Apple, Amazon, Disney. If ISIS started a streaming service, you’d call your agent, wouldn’t ya?”

Wherever you land on the morality question, Gervais’s comments also support the notion that the Streaming Wars’ big winners will be production studios and talent. According to Nielsen’s Total Audience Report published in February, the 646,000 unique program titles available to U.S. consumers in December 2019 represented a 10 percent increase from all of 2018.

“If you are in the business of creating content and have a good track record of creating high-quality content, this is a gold rush,” Rayburn says, citing Reese Witherspoon as an example.

In 2016, the Oscar-winning actor founded Hello Sunshine, a wide-ranging media company that has its own cable channel and does content production. Witherspoon has made production deals with Apple TV+ for The Morning Show, a limited series for Netflix called From Scratch based on the memoir of the same name, and two films for HBO Max, and she will be narrating a documentary series on Quibi (where her husband, Jim Toth, is the head of content acquisition and talent). At the Golden Globes, two of the TV series she stars in and produces were nominated for six awards.

“The reality is that the streaming services have empirical data that audiences want to see people of different ages and different backgrounds,” Witherspoon said last fall in an interview with The Telegraph. “I’m enormously grateful to these streaming services—it’s changed my entire career.”

During Netflix’s October earnings call, Sarandos estimated that this competition for shows from the likes of Witherspoon and others is driving up their prices. “On a very competitive show, there’s probably been 30 percent price escalation from this time last year,” Sarandos said.

During the fourth quarter of 2019, Netflix introduced 802 hours of original programming, up from 600 hours for all of 2016. Its 2019 slate earned 24 Oscar nominations but took home only two awards: Laura Dern for Best Supporting Actress for Marriage Story and Best Documentary Feature for American Factory. But besides shaking up the awards shows, these streaming services are having an impact on how we watch and what gets made.

Netflix learned early that viewers like shorter seasons, whose 10 to 13 episodes make them candidates for binge-watching. High-quality shows have complex narratives, and it’s rare, in our family’s experience, for an episode on Netflix not to end with some cliff-hanger that leaves you eager to start the next episode.

Netflix’s embrace of data is a continuation of a trend that began in the ’80s, when box office collection data and technologies like cable and home video turned the industry upside down. “The insane sequel sensation of the last 20 years, all of that’s driven by data,” Gunnarsson says. “They know that 75 percent who saw the original movie will go and see the sequel.”

That will accelerate. Netflix has 20 years of my data and has been incorporating some of that user behavior into its content-making decisions going back to House of Cards. Now, with every entertainment company a streaming platform, they will all be scrambling to harvest data for the war against Netflix.

In early January, Warner Bros. announced a partnership with Los Angeles–based startup Cinelytic, which uses artificial intelligence to help studios make decisions about the value and viability of proposed projects. Cinelytic looks at factors like the box office track record of stars, similar films, costs, and audience behavior—data that then figures into contract negotiations and predicting profitability.

Cinelytic cofounder and CEO Tobias Queisser says that the new entrants face huge data gaps compared with Netflix and Amazon. He also acknowledges that there is some nervousness across the entertainment industry caused by the “algorithmization” of content, but he emphasizes that this technology does not target the creative process.

“It’s totally understandable. There are always concerns, especially when it’s about algorithms and words like AI that sound scary,” Queisser says. “This is just enabling creativity and enabling the industry to potentially take more risks and have a deeper understanding of their content.”

Unfortunately, no one seems to have developed AI to help me click through this deluge of content across all these services. Three decades ago, Bruce Springsteen sang about the anxiety of living in the emerging world of cable TV, where there were “57 Channels (And Nothin’ On).” A song by me about having “5 Video-Streaming Services and Too Much to Watch” would probably be a lot less edgy. But unlike Springsteen’s hero, who shoots his television in the end, I’m too distracted binge-watching my favorite shows to feel any existential dread.

Chris O’Brien wrote about Bookshop, a new online store that seeks to help independent booksellers compete with Amazon, for Alta, Fall 2019.

AN OCEAN OF CHOICES

• Launch: 2019
• Offerings: Despite involvement from Steven Spielberg, Apple TV+ has a rather thin lineup. One of its first titles, The Morning Show, scored several Golden Globes nominations.
• Monthly fee: $4.99 (one-year free subscription included with purchase of new Apple device)
apple.com/apple-tv-plus

• Launch: 2014
• Offerings: The first service from a U.S. network, CBS All Access streams live sports like NFL and NCAA basketball games; originals include Star Trek shows Discovery and Picard.
• Monthly fee: $5.99 ($9.99 with no ads)
cbs.com/cbs-all-access

• Launch: 2019
• Offerings: Over 600 movies and TV shows at the time of its November launch; includes the massive Disney back catalog, Star Wars, Marvel, Pixar, National Geographic, and new original programming.
• Monthly fee: $6.99 ($12.99 bundle includes Hulu and ESPN+)
disneyplus.com

• Launch: May 2020
• Offerings: The service comes with HBO titles like The Sopranos and Game of Thrones, shows like Friends and South Park, and movies from Studio Ghibli and the DC Extended Universe.
• Monthly fee: $14.99
hbomax.com

• Launch: 2008
• Offerings: A wide selection of TV shows, often available for streaming 24 hours after they air. Some original content, most notably The Handmaid’s Tale.
• Monthly fee: $5.99 ($11.99 with no ads; also bundled with Disney+)
hulu.com

• Launch: 2007
• Offerings: The granddaddy of them all, with an enormous catalog that since 2013 has focused on original movies like The Irishman and Roma and shows like Sex Education and BoJack Horseman.
• Monthly fee: $8.99 (enhanced plans for $12.99 and $15.99)
netflix.com

• Launch: April 2020
• Offerings: Some original content plus the massive NBCUniversal catalog of shows like The Office and movies like Jaws and the Fast and the Furious franchise.
• Monthly fee: Free for Comcast customers (or $4.99; $9.99 with no ads)
peacocktv.com

• Launch: 2006
• Offerings: More than 20,000 movies and TV shows plus a growing library of high-quality original shows, including Bosch, Fleabag, and The Marvelous Mrs. Maisel.
• Monthly fee: $8.99 (or included in an annual $119 Amazon Prime membership)
primevideo.com

• Launch: April 2020
• Offerings: Targeting millennials with short-form content optimized for viewing on mobile devices, including reality, food, and news programming.
• Monthly fee: $4.99 ($7.99 with no ads)
quibi.com

• Launch: 2015
• Offerings: A small selection of original shows and movies, like Cobra Kai and Impulse, mixed in with some live sports and music. Features include downloads, background streaming, and no ads.
• Monthly fee: $11.99 ($6.99 for students; $17.99 for family plan)
youtube.com/premium

 

 

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