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Why Netflix may no longer be king of streaming

Stream | January 13, 2022

Long gone are the days when entertainment media was a straightforward game — studios made content and sold it to distributors, who delivered it to consumers. The internet, of course, and then the arrival of streaming has turned the industry upside down and made media production and content monetization just about anyone’s game. 

Players in the big tech and telecom industries are taking note, as demonstrated by the heavy M&A activity in the industry over the past decade. Comcast acquired Universal Studios in 2013, AT&T acquired Time Warner in 2018, and in 2021 Amazon bought MGM Studios for $8.5 billion.

One thing that seems certain is that any current state of media is transitory — the world and technology are changing at a continuous pace and the only winners in media will be those who can recognize what’s coming next and capitalize on opportunities.

In this interview, a former Warner Bros. Entertainment Vice President predicts who these winners will be and how the increasing role of big tech in the media industry is impacting the way content is created and consumed.

Quick Takeaways

  • The competitive landscape of entertainment media is evolving drastically as big tech and telecom companies increasingly enter the market through M&A.
  • The internet and platformization has democratized the creation and monetization of entertainment media, and wide space for innovation exists in the industry to capitalize on the opportunity.
  • Netflix  is likely to lose their position atop the streaming industry as their subscriber growth hits its ceiling and competitors with stronger additional core competencies — especially Disney — continue to increase their market share.

The big media landscape is evolving

Today’s media evolution is being defined by the expansion of big players in the industry to include tech and telecom giants.

But why now? What is it about the entertainment media industry over the past decade that’s suddenly made it such an attractive prospect to corporations that have either accomplished booming success elsewhere or that, for decades, hadn’t so much as blinked at entertainment as part of their business strategy?

The answer: online platforms. The rise of internet platforms have made media production and distribution just about anyone’s game.

“Pretty much anybody who has web traffic is considered a platform and if you’re a platform, you could actually be considered a broadcaster. If you’re a broadcaster, you need engagement, you need people coming back to your site, and all these different things, which sounds a lot similar to what — let’s say — ABC was doing 35 years ago.”

If anyone with web traffic can be a media broadcaster, it’s no surprise to see Amazon winning big with Prime Video and pursuing opportunities like the MGM acquisition. But this expert sees a future where players in adjacent markets can also get in on the action, too, just by leveraging their websites.

“That could be something as grand and wonderful as a reboot of Friends, a new Friends episode on the Target.com website every week, or it could go down to every day at 5 o’clock a  five-minute TikTok from Matt LeBlanc as opposed to the actual Friends. The implications behind that are if there’s traffic on these sites, then people want to monetize it.”

The pandemic has also accelerated the streaming trend. People turned almost exclusively to streaming platforms in the absence of traditional consumption methods — namely theaters. Only time will tell if these traditional methods will make a resurgence or begin to phase out even more.

“It was happening a few years ago, but it’s accelerating. The entertainment industry is really becoming a sub-industry of others, particularly tech.” And that doesn’t necessarily mean just tech giants — we all know how TikTok has decentralized the music industry altogether!

After building the streaming industry, Netflix likely to fall behind

Netflix has been the undisputed leader of the streaming race since it began, and the pandemic only boosted their growth even more. As shared in the interview: “They basically invented and you could argue perfected the streaming business . . . They made it. It’s theirs. Everyone else is trying to copy.”

So why, then, does this expert foresee Netflix falling behind its competitors?

“When these guys get to a certain size, the one-trick pony can’t run anymore. They have to go the other direction. Funnily enough, as Disney and Warner try to become more and more like Netflix, Netflix tries to become more and more like Disney and Warner.”

The thing is, the business that Disney, Warner, and the like are trying to copy from Netflix — streaming — is much easier to duplicate than the ones Netflix is trying to copy in return.

Like consumer goods, or theme parks.

“[Netflix] had the right idea at the right time. That doesn’t mean that Netflix can just roll in consumer products and have people buying Stranger Things dolls over Mickey Mouse . . . It’s just not that easy to do something that’s outside of your core competence. I think that more than anything is why Netflix falls down the totem pole.”

Future forecasts: what to expect from Disney, Amazon, Netflix

What will we see going forward? If you ask this expert, it’s Disney that will come out on top.

While Netflix has very successfully moved into traditional studio production and original content, their slowing subscriber growth will close the gap between Disney and Netflix for the top spot in entertainment media:

“You can’t grow forever. You have a law of diminishing returns there.”

Disney, on the other hand, is best positioned to win in an industry that demands more from media companies than, well, just media.

“Disney got this massive start into this new business, the streaming business that the other players would love to have plus everything else they have, plus the potential to blow it out of theatrical, plus the theme park, plus the consumer products business. I think Disney’s quite frankly pure entertainment, probably the strongest of all. They’re hitting all the cylinders.”

As for Amazon?

“Why does Amazon invest $9 billion in MGM? Why do they invest . . . when they’re basically running a cloud service and an ecommerce site? It helps them I think with branding. It helps them with getting engagement on the site. I think quite frankly it just helps their ego.”

Whatever their reason, it’s likely their foray into entertainment media will continue to go just fine, while they remain less worried about winning in this singular area and more about remaining the one-stop-shop for just about anything consumers want and need — including media.

And according to this expert, smaller players like Warner and Universal will stay relevant but, at least for the foreseeable future, will be swimming upstream.

“It’d be years, decades before they ever catch up.”

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