Nearly 13 years ago, Netflix launched the first subscription-based streaming service for “Hollywood content,” laying the foundation for a massive paradigm shift in the way we access and watch movies and TV. Hulu followed suit soon after, but Netflix again changed the game in 2013, releasing the entire first season of “House of Cards” all at once. This original series was a first-of-its-kind and helped catapult the company’s growth by popularizing the now-common audience behavior of binge-watching.
Since then, many more streaming services have hit the market, each armed with a slate of award-winning originals, from Amazon Prime Video (“The Marvelous Mrs. Maisel” and “Fleabag”) to CBS All Access (“Star Trek Discovery” and “The Good Fight”).
And now, with Apple TV+ and Disney+ set to launch this November, and NBC’s Peacock and WarnerMedia’s HBO Max also on the horizon, it’s safe to say that we’re officially about to reach “peak streaming.” But make no mistake, while all of this consumer choice at first blush may seem like a good thing, there will be negative consequences, too—for advertisers, consumers and even the platforms themselves.
Advertisers will increasingly face an ad-free norm
Let’s be real. Given the choice, consumers don’t want ads interrupting their content. Existing streaming services like Netflix, Amazon Prime and DC Universe are inherently advertising-free, just as Disney+, Apple TV+ and HBO Max will be. Others, like Hulu, CBS All Access and even YouTube, all have ad-free options for a higher subscription price, which NBC's Peacock also plans to offer when it launches in the spring of 2020.
With continued ratings declines and ad-price inflation for linear TV—and audiences increasingly hopping on the no-advertising over-the-top (OTT) bandwagon—where’s a brand to go? Despite the growing number of ad-free streaming options, there are still many existing and newly emerging platforms on which advertisers can run their spots.
One exception to the ad-free movement seems to be Quibi, yet another new streaming service that is set to launch in April of next year. Led by Meg Whitman and Jeffrey Katzenberg, this mobile-only “quick bites” service just announced it has already sold out its $150 million advertising inventory to marketers including PepsiCo, Walmart, Procter & Gamble, Taco Bell, T-Mobile and General Mills.
In the same week, Roku announced its acquisition of demand-side platform (DSP) Dataxu that will likely put the connected-TV platform—which is already one of the biggest ad sellers in the space—at the center of OTT advertising. Now, Roku can expand its offerings beyond its own platform.
Yet, in spite of all of these ad-supported streaming options, brands are still not taking full advantage of connected TV advertising opportunities. In fact, IPG’s Magna Global reports that 29 percent of TV viewing is done via OTT, but only 3 percent of television ad budgets are allocated to the space.
Consumers will become overwhelmed by choice—and by cost
Earlier this year, both Nielsen and eMarketer reported that we’ve hit attention ceilings when it comes to media consumption. Now, it’s all about making tradeoffs. To consume net-new media, one needs to give up something else; and it’s already hard to decide what to watch because there’s simply so much choice. This “choice paralysis” will only get worse in November, when Disney+ launches with 600 titles in addition to the originals from Apple TV+. And in the spring of 2020, the debut of Peacock and HBO Max will add another 25,000 hours of streaming choices to the mix.
If your head’s not yet spinning, let’s talk about the issue of cost. Original programming is an irresistible bait that compels consumers to sign up for subscriptions to streaming services. But if you want to watch past episodes of “Friends,” you’ll now only be able to do that on HBO Max, while “The Office” will be streamed exclusively on Peacock. And how can you not subscribe to Disney+, given everything it’ll be offering from its Disney, Marvel and Star Wars franchises? Despite their seemingly reasonable individual monthly price tags, these subscriptions add up quickly.
But there’s some relief in sight, as many of these companies are offering deals for early adopters. Disney+ has announced that all new and existing Verizon Wireless customers (who have unlimited data plans) will receive a one-year subscription at no extra charge. That’s similar to what Apple is doing with its Apple TV+ service for anyone who buys a select new Apple device. And let’s not forget that Prime Video is already included with an Amazon Prime membership and Spotify Premium subscribers receive Hulu for free, while many cable and wireless providers comp in Netflix.
Netflix will be challenged by compelling, competitive originals
While shares of Netflix surged 8 percent after its recent Q3 earnings report, the company fell short of its domestic new-subscriber expectations. It described the near-term impact of the forthcoming competition as “modest headwinds.” And that’s, in part, because of the hype and quality of the original series slated for these rival platforms.
The November Apple TV+ launch will feature 10 original series, including “The Morning Show,” starring Jennifer Aniston, Reese Witherspoon and Steve Carell. Less than two weeks later, Disney+ will launch with "The Mandalorian"—a Star Wars spinoff series centered on everyone’s favorite bounty hunter, Boba Fett. And in 2021, Disney+ subscribers will also get to watch the three highly anticipated Marvel series when “Loki,” “WondaVision,” and “Hawkeye” take center stage.
But wait, there’s more: Peacock and HBO Max will also have their share of buzzworthy original content. Peacock is boasting its original drama “Dr. Death,” starring Alec Baldwin, Christian Slater and Jamie Dornan, as well as reboots of “Battlestar Galactica,” “Saved By the Bell” and “Punky Brewster.” HBO Max will feature a “Gossip Girl” reboot as well as an array of to-be-announced content from A-list producers like J.J. Abrams and Greg Berlanti.
All of this adds up to a ton of competition for Netflix, which coincidentally increased its prices over the summer, making it the most expensive of the pack. This could prove to be problematic for its business if (and only if) it doesn’t aggressively continue to add differentiating value to its subscriber base.
In the end, as with any great innovation, disruption will ensue—bringing with it opportunities and consequences. I’ve believed for a long time that all TV will eventually go the way of streaming. It’s happening ... and it’s happening fast. Advertisers, consumers and platforms alike are just beginning to reap the benefits of this seismic shift in the TV landscape but they’re also feeling the consequences. The streaming wars are just getting started.