Among the various entertainment platforms, streaming services have become the dominant force is shaping popular culture. Over the past 12 months, this sector has brought forth programming that has invigorated home audiences (think of “Squid Game,” “Bridgerton” and “The Beatles: Get Back,” among countless others) and dominated the news headlines with controversies (Tucker Carlson's three-part Fox Nation series on the Jan. 6 siege, the brouhaha over Dave Chappelle’s “The Closer” special or the Scarlett Johansson lawsuit from last summer over the simultaneous theatrical and streaming releases of “Black Widow” by the Walt Disney Co. (NYSE: DIS).)
The streaming services, which were promoted during the height of the pandemic as an alternative entertainment source when movie theaters were closed, are now the dominant force in the most prestigious center of the film world – in this year’s Academy Award nominations, Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) emerged as the powerhouse studios, gaining multiple nominations for such films as “The Power of the Dog,” “CODA,” “Don’t Look Up” and “Being the Ricardos.”
In a sense, the streaming sector has grown up. But while the sector is flexing its muscles to display its newfound strength, it is also discovering new muscles that have yet to be developed – which, in the near-future, could further solidify its audience base while generating new revenue streams.
Wider Horizons: Tim Nollen, senior media analyst at Macquarie Bank, predicted this transition would occur last December in his paper “Advertising and Media: Macro and Micro Themes for 2022,” with a forecast that the major media operations would prioritize streaming over other media platforms.
“A key common theme among the media networks is the launch and ramp up of their DTC streaming services, as these companies look to make the transition from pay TV to OTT business models,” Nollen wrote. “2021 was a particularly exciting time for this, especially with the launch of Discovery+ and the rebrand of Paramount+. But as 2021 new services come to market and existing services start to expand internationally, we believe that 2022 will be a year with heightened levels of competition as the streaming wars move to new levels.”
For the media companies, Nollen observed, there are no limits – either financial or geographic – in the pursuit of success.
“All of the media networks are talking about 2022 being an important investment year where elevated levels of content production are designed to attract and keep consumers to their service amid this increasingly more competitive environment,” he continued. “2022 will also be the year of international expansion as the newer services start to ramp up their international expansion and existing players engage in aggressive marketing to maintain and expand their market share.”
Seth Shafer, senior analyst at Kagan, the media research unit of S&P Global Market Intelligence, observed that the major streaming services are working aggressively to forge ahead of their rivals.
“We're still in a growing market – it's obviously a crowded market,” he said. “I think in 2022 we’re going to see more – and I hate to use warfare analogies, especially these days – intense competition between the major U.S. services to keep subscribers engaged and to minimize churn.”
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Costs And Benefits: Shafer pointed out that today’s average consumer may subscribe to three-to-five streaming services, keeping “a couple as anchors and then moving in and out of their services as they catch up on content.” However, he cautioned that the recent dramatic changes in the economy might force many viewers to reconsider their streaming habits.
“We came through the pandemic in the U.S. with home prices soaring and stimulus payments, and I think everyone felt like it was fun to splurge and treat yourself on the streaming side,” Shafer said. “Now with inflation becoming more obvious, people are going to make hard choices there.”
Adding to that challenge is the decision by some streaming services to raise their subscription fees for U.S. customers. Last month, Amazon Prime raised its annual membership fee from $119 to $139, the first subscription uptick since 2018. In January Netflix’s Standard plan went up by $1.50 to $15.49 per month and its Premium plan inched up by $2 to $19.99 per month while its Basic plan saw a $1 bump-up to $9.99 per month.
Disney raised its subscriptions in March 2021, with $1 increases for Disney+ to $7.99 per month and the triple bundle of Disney+, Hulu (with advertisements) and ESPN+ to $13.99. However, Disney+ announced earlier this month that it plans to introduce an advertising-supported subscription of its service in late 2022 to run alongside its current ad-free offering. The company framed this addition as a way to help viewers save money.
“Expanding access to Disney+ to a broader audience at a lower price point is a win for everyone – consumers, advertisers, and our storytellers,” said Kareem Daniel, chairman of Disney Media and Entertainment Distribution, in a press statement. “More consumers will be able to access our amazing content. Advertisers will be able to reach a wider audience, and our storytellers will be able to share their incredible work with more fans and families.”
To date, the other major streaming services are not following the Disney+ example – Netflix Chief Financial Officer Spencer Neumann stated an advertising-supporting platform is “not something that’s in our plans” – although when pressed during a news conference if he’d change his mind should a solution be found to incorporate advertising without disrupting the user experience, he admitted, “Never say never.”
Neil Begley, senior vice president at Moody’s Corporation, pointed out that higher subscription costs and a new flush of advertising dollars are needed to help the streaming services finance their unique content.
“Maybe 10% of content out there is competitively sought after,” Begley said. “The rest of it is new talent, new ideas, people who are looking in places where they've never looked before. And essentially, it is all trial and error – you never really know until the audience gets a look at it as to whether or not it's going to resonate. And I think everybody is throwing a lot of spaghetti against the wall, and figuring out which is going to stick and run with it.”
“The entertainment streaming wars is alive and well,” he added. “I'm sure that all of these companies will push the envelope on content. Netflix is successful in bringing in stories that have been popular in other countries and dubbing it and then distributing it around the world like, ‘Squid Game.’ That really sets the tone for everyone else.”
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The Next Frontiers: The streaming services have recently begun moving slowly beyond episodic series, movies and standalone specials into a wider selection of programming that mirrors the scheduling format long favored in broadcast television.
Entertainment industry award shows, which have experienced a steep ratings slump in recent years, are starting to find a new home on streaming. Last September, the Tony Awards made history as the first awards ceremony with a streaming aspect – nearly all of the award categories were presented in a livestreamed show on Paramount Global’s (NASDAQ:PARAA) Paramount+, with a CBS telecast staging performances from shows nominated for Best Musical and the presentations of the Best Musical, Best Play and Best Revival of a Play awards.
On March 7, the entire ceremony for the Academy of Country Music Awards was livestreamed on Amazon Prime. The show was the center of the entertainment media news thanks to dramatic moments including host Dolly Parton’s heartfelt and unexpected pledge to dedicate the event “to our brothers and sisters in Ukraine” and Morgan Wallen’s career comeback with Album of the Year – he was barred from last year’s awards show and was being briefly blacklisted from country music radio and music streaming when a video emerged of him in February 2021 making racially insensitive comments.
“I think this is still about entertainment,” said Begley about streaming’s focus. “But the other shoe will be around sports and around news.”
On the news front, one of the newest entries in the streaming sector will be CNN+, a spinoff of the 24/7 cable news station that is set to launch on March 29. Ian Greenblatt, managing director for technology, media and telecommunications intelligence at J.D. Power, believes this new player has the potential to make an impact in already crowded market.
“I don't think anybody is too late to the game,” he said. “There's space at the table from for many streamers now. I think CNN has a loyal audience and this becomes another channel for that audience to interact with the brand.”
Shafter agreed, adding there was a niche audience ready for a streaming version of their favorite cable news programming.
“If it satisfies the super fans of CNN and if you're into news, is this something that you're going to tack on?” he asked. “I think we kind of saw that with Fox nation from Fox (NASDAQ:FOXA).
On the sports front, Disney has already had a head start with ESPN+, but its rivals are catching up quickly – Amazon Prime will begin streaming the NFL's "Thursday Night Football" starting in the 2023 season and Apple TV+ recently signed a deal with Major League Baseball to livestream doubleheaders on Fridays beginning with the 2022 season.
MSG Networks, the cable television unit of Madison Square Garden Entertainment Corp. (NYSE:MSG), is planning to launch a streaming service before the end of the year. The company is currently in talks with to secure multi-year rights to NHL and NBA games.
“We continue to explore different direct-to-consumer models with an eye towards the launch by the end of this calendar year,” said Andrew Lustgarten, president of Madison Square Garden Entertainment, in a recent earnings call. “While the media landscape continues to evolve, we remain confident in the popularity of our live content and believe that our commitment to innovation will continue to drive value for partners, advertisers and viewers alike.”
Comcast Corporation’s (NASDAQ:CMCSA) Peacock was one of the few bright beacons in the NBCUniversal presentation of last month’s Winter Olympics in Beijing – while television viewership of the games reached a historic low, Peacock aired the entire event for its paying subscribers (a $9.99 per month cost) and recorded its strongest 18-day span of usage in its two-year history, which NBC Sports Chairman Pete Bevacqua dubbed “a home run.”
Greenblatt predicted more sports events will be seen on streaming, but he warned it could create new financial stress for the companies seeking these events.
“It's an expensive play,” he said. “Sports rights are extraordinarily expensive, but we only need to look back at the NFL on Fox to see that sports programming does drive user adoption. When the Fox network first came out, what did they do? They spent like crazy to get the NFL – and it worked really well for them.”
And at least one analyst believed the sector’s largest company needs to start spending on both sports and news if it wants to stay in the lead.
“The ‘Job to be Done’ by TV for consumers is to maximize their leisure time, so Netflix must offer live sports and breaking news, just like its lower cost/month streaming competitors,” wrote Laura Martin, senior entertainment and internet analyst at Needham & Company, in a March 16 analyst’s note. “If Russia invades Ukraine, streaming competitors with a first-rate ‘breaking news’ desk attract new subs faster, and churn falls, we believe.”
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