The New Sheriffs In Town
Once a generation, the entertainment industry experiences a seismic shift that disrupts the established system and marks a change in the way we perceive and consume entertainment. Be it the transition from silent films to talkies in the 1920s, the advent of broadcast television in the 50s, the cable boom in the 80s; changes have happened every three decades or so. Now, it’s happening again.
Streaming platforms (OTTs) have been around for about a decade but they had remained in the sidelines up until now (sure, Netflix has always done well but it was never a main player). Now, they’ve woken up and are making a transition to the mainstream. In this article, we take a brief but comprehensive look at their history, evolution and future. Lets dig in.
“For those of you unfamiliar with the term, OTT (over-the-top) platforms are streaming services that provide entertainment content ‘over the top’ of cable or satellite, i.e. through the internet. Netflix, Hulu, Prime video, Disney+ are some of the leading pioneers ”
Our story begins in 1995, ESPNET SportsZone , an online sports information service came up with cutting edge technology to broadcast real time audio. The MLB were quick to pick this up and used this technology to stream real time audio commentary of the game between Seattle Mariners and New York Yankees on 5th September 1995, thus creating what would be the world’s first live streaming event. A few years later, this company, now called RealNetworks(due to a name change) tussled with Microsoft over the domination of the brand new ‘ streaming media’ market. While RealNetworks came out the winner, they couldn’t make much of their new tech and fizzled away. Microsoft had some success with Windows Media for a few years but they too, didn’t make it far.
Throughout the early 2000s, a new player called Macromedia burst into the market with their ‘Flash Player’, seamlessly integrating interactivity, web and streaming media for the first time and eroded Microsoft’s share in the streaming market. A new era in streaming had begun but the pesky problems of scalability and bandwidth still remained. Fast forward to 2007, a company called Move Networks introduced a technology that would once again disrupt the industry : HTTP based adaptive streaming. Without delving into the technicalities, suffice it to say that it eliminated grave buffering and connectivity issues. Soon, Microsoft launched its own streaming service in 2008, the same year when Netflix developed its own technology for their “Watch instantly” feature (more on this next). These became the platforms of choice for high-profile events such as The Olympics, Wimbledon , Felix Baumgartner’s space jump etc. . While a lot of players dabbled for a short time in the market at the time, there is one giant that warrants an exclusive look …
In 1997, during a commute, two software executives of a tech company came up with the idea to sell VHS and DVD tapes over the internet. Inspired by their contemporary Amazon’s business model, in 1998 they launched a small company by the name of Netflix that provided online video rental services. 9 years and a multitude of patented industry-defining features later, they found their golden egg. In 2008, they launched a streaming service, called “ Watch Now” which allowed members to instantly watch television shows and movies on their personal computers. This would go on to become Netflix’s defining feature.
“Reed Hastings initially considered naming his company Netpix. Netpix and chill ,anyone ?”
The next 10 years saw Netflix’s meteoric rise, accompanied by : extensive global outreach to 190 countries, the rise of personalised recommendation systems, targeted advertising and foray into producing quality original content. High investment shows like Stranger Things, House of Cards, Narcos and high budget acquisitions like Friends, Game of Thrones(before HBOMax), Money Heist paid off and raked in millions of subscribers every year. Exposure of subscribers to content from different parts of the world was a major impact of Netflix. Spanish telenovelas, Latin American reality TV, Japanese anime, K dramas, comedy specials ,award winning documentaries, live sporting events, independent films, art-house movies, even live News reporting ; if variety is the spice of life, this is the hottest stuff ever ! And the moolah, a whopping 194 billion dollars, in just 12 years. For comparison, their nearest competitor Disney, is currently worth 192 billion. Truly breath-taking, isn’t it ? But alas, nothing lasts forever.
All this success brings in competition, and when we’re talking Hollywood, the competition is bigwigs like Disney, Warner Bros and NBC. Initially hesitant to invest billions of dollars of movie revenue into the then-precarious streaming service market, these studios stayed in the sidelines. Besides,building video platforms of the size needed to compete with Netflix and Prime would be frightfully expensive. Also, mastering the underlying technology would require years. Better to bide the time. But when they woke up to the inevitable fact that streaming would be disruptive to them in the near future ,they decided to act. And now that they have, everything’s changing.
“In 2019, the number of streaming customers (about 700 million) overtook the number of cable television consumers (about 650 million) for the first time”
Disney Plus arrived earlier this year with its mammoth collection of content including but not limited to Star Wars,the MCU, Pixar movies and decades of nostalgia inducing content. HBO Max offers about 10,000 hours of entertainment including Friends, South Park, hundreds of Warner Bros movies, everything Batman and CNN documentaries. Peacock, an NBC platform is all set to launch with The Office, SNL, Universal films’ collection (Fast and Furious, Bond etc). Apple rolled out Apple plus last November with great initial success. All this, at very competitive prices. And guess what, almost all of these which were offered on Netflix until now, have been pulled off their inventory. This has hurt Netflix, badly. On top of this, growth in quantity economies like India have been sluggish, owing to their relatively high pricing. Amazon on the other hand can afford to absorb losses from Prime Video for a few years and is thus offering it for cheap prices, solely to stave off other platforms. This leads to accumulation of a large market share in a large country who in the near future, is predicted to yield bumper returns for all these investments . In just a span of few months, the market has crowded up and got messy, very fast. So, what does this entail ? What will the future look like ? We’ll talk about all that but first lets take a detour…
“Video killed the radio star. Will OTT kill the cinema theatre”
Quite possibly the biggest question that arises when one thinks about streaming, is its impact on cinema theatres. On first glance ,it might seem that OTT is detrimental to movie theatres, but it’s trickier than a simpler inverse relationship. Yes, OTT spoils us with choices and easy accessibility, and is a much simpler way to watch movies than hauling ourselves to the theatres. But going to the movies is seen as an outing with the family or loved ones; two hours of good fun and a delicious meal. Apart from ardent and picky cinema fans, most of the population don’t care if it’s a Michael Bay or a Tiger Shroff movie (which is why such disasters still churn out huge profits ). The simple fact is that theatres and OTT platforms serve different purposes. Unless the entire generation’s mindset changes and there is a massive decrease in cinema footfalls, the status quo will remain the same.
Coming back to the OTT war…
One of the main causes of the mass migration of consumers to streaming services is quality. The subscriber is no more force fed content, he doesn’t have to TiVo or record his favourite shows. Customer has truly become the king now. He watches whatever he wants, whenever he wants. And he’s willing to pay more for that. The companies know that they need to produce binge-worthy quality content, and to do this, they need talented people. Top Hollywood Analysts say that money is being shelled out on ideas and scripts like never before. Netflix, Amazon and Apple have been steadily poaching directors from established studios and television networks with eye-popping pay. David Benioff and DB Weiss (Game of thrones), Shonda Rhymes (Grey’s Anatomy), Charlie Brooker (Black Mirror) have followed Adam Sandler and David Letterman to Netflix. Phoebe Waller-Bridge (Fleabag) , Gillian Flynn (yes, the Gillian Flynn) have already started their stints at Amazon Prime Video. Warner Bros dug deep into their pockets to keep Greg Berlanti (The Flash, Riverdale) and J.J Abrams. Producers who mostly stayed in the backstage are now in hot demand. Publicists, florists, caterers, set decorators, hair-stylists and headhunters are all earning figures like never before. The entertainment industry is buzzing, and it’s only expected to increase. These are dynamic times with lots of moves and ventures. However, once the dust settles (which is quite far off, so no need to worry now), many players will perish and only a select few will come out of the end game.
Currently, streaming services differentiate themselves based on the size of their content catalogue. As time progresses, most of these services will converge to a point where they will all have a similar offering and that’s when the factor of original content comes into the picture. Most of the companies have realised this, hence the hefty investment in talent we spoke of earlier. However, eventually the competition increases to a point where the weaker players will have to quit or join larger incumbents. Apple might quit if they don’t see merit in pursuing this line of business. Disney might(probably will) start offering at dirt cheap prices and drive out the competition. If things progress that way, there will be heavy casualties. After the dust settles, the market place will constitute of only 3–4 behemoths. This will be the End Game.
My bet : Disney, Warner Bros, Netflix and maybe 1–2 other players. Netflix will be an established company by then and will tide over the war with their experience and early investments. Warner Bros are backed by the supergiant AT&T, they will play hard and ruthlessly come out as winners. And Disney, well… they’re Disney , they’ll be the top gun. But this situation is a long way off. For now, the streaming wars have just begun and it’s going to get more exciting.
Thanks for your time,
Rohit
One of our writers has written a fantastic article on the time lapse of Disney, check it out if interested https://link.medium.com/CCmAk31obab . This summaries what I meant by “ well, they’re Disney” in the last paragraph.
