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October 5, 2021
It is no longer an exaggeration to say that cable TV might become extinct. The meteoric rise of online video streaming shows no signs of slowing as the pandemic has allowed these platforms to thrive and the market to become more competitive. Find out what this means in our latest commercial awareness update.

At the start of 2020, the global video streaming market size was valued at $50.11bn and is expected to expand at a CAGR (compound annual growth rate) of 21% until 2028.

A J.D Power survey revealed that the average American subscribed to 4 SVODs in May 2020, up from 3 at the start of the year. Spearheaded by Netflix, the SVOD (subscription video-on-demand) business model has now become commonplace.

By the end of 2020, over 32 million British households had subscriptions to at least one of Netflix, Amazon Prime Video or Disney+. This figure is more than double the number signed up to traditional pay-TV providers Sky, BT and Virgin Media.

The biggest global market player remains Netflix but is now hotly challenged by Disney+, Amazon Prime Video, Hulu, Paramount+, Discovery+, Apple TV+ and HBO Max amongst others.

This Commercial Awareness update will examine the key companies involved in online streaming wars, considering which of the core players is best equipped to thrive in such a competitive and fast-growing market.

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Netflix

Trailblazer Netflix remains the largest global market player by number of subscribers and international reach. Netflix concluded Q4 of 2019 with 152million subscribers, but enjoyed a 34% increase to 204million by the end of 2020’s Q4. Total annual revenue for 2020 exceeded $25bn. However, 2021 has seen much slower growth for the giant, falling short of adding the 6million subscribers it had forecast to register in the first quarter. Co-CEO Reed Hastings has attributed 2021’s ‘wobbly’ performance to paused content production over the pandemic.

One key asset for Netflix is its huge spread of content, holding a larger global catalogue and operating in more markets than its competitors, with over 15,000 titles and availability in more than 190 worldwide markets. Whilst investors had been concerned about the company’s content spend affecting cash flow, this is something the company is working on. In 2020, Netflix had licensed content assets amounting to $13.75bn, a reduction from $14.07bn the year before. Simultaneously, Netflix has invested in Netflix Originals and, as such the company’s produced content assets have jumped from $6bn to $11bn in the same period of time. As of August 2021, Netflix Originals made up 40% of Netflix’s overall library in the United States, saving the company from considerable licensing payments.

Amazon

Amazon Prime Video was launched in the US in September 2006 and has been offered in the UK since 2014. By the third quarter of 2020, over 10.1million UK households held an account. Worldwide, Amazon has amassed over 200million subscribers, of which 175million have streamed at least one movie or TV episode in the last year.

However, it is difficult to compare Amazon’s success with the likes of Disney+ and Netflix due to Prime Video’s ancillary status as part of the Amazon Prime membership package. How many subscribers pay for an account to watch Amazon Prime Video and how many use it because they have enjoyed Amazon’s next-day delivery service and other Prime membership benefits is unclear.

Furthermore, ex-CEO Bezos has admitted that Amazon’s streaming strategy aims to convert viewers into shoppers and vice versa. Unlike Netflix, which has the sole aim of streaming content, Amazon seeks to define global e-commerce. Due to Amazon’s conglomerate status and making $108bn in sales in 2020, the company is able to spend considerably more on its shows. Where Disney has stated it plans to spend between $8-$9million each year on content, Amazon has already spent $1bn on one show alone: the new Lord of the Rings TV series.

Disney+

Disney+ has enjoyed the fastest rise of the SVOD companies. Launched in November 2019, executives hoped the platform would reach 85million subscribers by 2024. In fact, Disney+ saw over 10 million US subscribers on its first day in operation, 100million global subscribers within 18 months and now holds 116million subscribers.

If revised estimates prove to be correct, Disney+ will displace Netflix as the largest online video streaming platform by 2024. CEO Bob Chapek is reluctant to guess what accelerated Disney+’s rise but other executives have credited the company’s ability to capitalise on cultural zeitgeist, noting the inclusion of Star Wars spinoff ‘The Mandalorian’ and the Marvel show ‘WandaVision’ on the platform.  Industry analysts believe Disney+’s ‘quality over quantity’ approach will pay off and see the company rise to around 300million subscribers by 2026, dwarfing Netflix’s predicted subscriber count of 286million.

Talking points:

  • Can Netflix retain its place as the largest online streaming platform?
  • How do Chinese video streaming platforms like Baidu’s iQiyi, Tencent Video, and Alibaba’s Youku compare? Will US companies break into the Chinese market and vice versa? 
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