Marketing’s Role in the Escalating Streaming Wars – Part 1

As travel bans restrict movement and countries continue to lock down cinemas and entertainment events, consumers are increasingly turning to the comfort of streaming services. In the first three weeks of March this year the total estimated number of minutes streamed to TV’s in the U.S was 400 billion, up 85% against the comparable three-week period in 2019. Streaming services sit within an ever-expanding, competitive ecosystem that has become crowded with many but understood by few, as multiple offerings from different providers have generated noise, but little clarity. The streaming wars have escalated, the Golden Egg being customer acquisition; getting customers to understand what content is stocked on your virtual shelves and happily parting with their monthly subscription in return for accessing them. In many ways, that monthly dividend is funnelled directly into a fund to directly support the kind of content the customer is seeking and if that is used negligently then they will go elsewhere.  

A function of this transition from linear television to streamed entertainment has meant that your choice of service defines both your accessibility to content and your taste. As humans, we like to be divided into groups with likeminded people and its likely that this need for curated, personalised content will feed into the streaming wars. And we’re already seeing that with the likes of MUBI who offer “hand-picked cinema” for art-house film fans. Customers will self-select into their preferred group that reflects their interests, but not before Netflix, Disney+, Hulu, HBO MAX, Apple TV Plus and the rest clearly define their product offering – particularly those new to the game. With multiple providers offering a variety of content, how can customers know what service is right for them? As much as the finance heads don’t want to admit it, the correct execution of a marketing strategy is absolutely imperative in this field as each platform must clearly distinguish its content from its neighbour.

Netflix 

The Business

Netflix is leading the way for the moment, but finds it increasingly difficult to gain subscribers as customers try out different platforms. With 167 million subscribers, the likes of Prime Video (101m) and Disney (50m) are hot on its heels as they carve into its market share. According to company reports, revenue in the U.S is up 23% YoY, but this is a result of a pricing hike in prior years that are taking effect now, the funds of which are being used to finance its extensive content roadmap. Netflix’s standard of content is up for debate and I’ve alluded to this before in previous articles. They have a particular affinity for the YA (Young Adult) genre and in their most recent earnings call, Chief Content Officer Ted Sarandos repeatedly made reference to the fledgling, “super popular” YA genres. Netflix has pinned its hopes on these kind of films as sequels and prequels can be splintered off, essentially creating the streamers’ very own tentpole movies. 

The levers underpinning Netflix’s “bull and bear” content strategy have shifted in recent years, with original content (the bull case) generating negative cash flow and the amortization of content (the bear case) growing but at a slower rate. In response to the changing competitive landscape, an aggressive original content roadmap was warranted and Netflix will be hoping to replicate the popularity of acquired content with their own original projects. A key driver of this has been its relentless focus on Hollywood, democratising Oscar-worthy content by providing the whole world with access to the likes of Roma, Marriage Story and The Irishman. Negative cash flow may ring some alarm bells, but if this works and subscriber growth continues then the Netflix flywheel will gradually reduce the reliance on acquired content, creating a virtuous cycle of investing in more original content, which generates more users that they can then spend more on more original content. They have alluded to the freedom this affords in a recent earnings report in terms of pricing, as the more Netflix can tap into the zeitgeist around their projects then the more leverage they’ll have to justify any future price hikes. 

The Marketing

Netflix is the leader of the pack in terms of content marketing – it has to be because of the aforementioned original content, which requires innovative approaches to get customers to click through and watch a show they haven’t heard of before. Where Netflix shines is in its social media and brand content strategy, both of which are key to engagement with viewers as they imbue these channels with the “Netflix personality.” Netflix sits shoulder to shoulder with the viewer, sharing unbridled excitement for an upcoming series release or using self-deprecating humour to its advantage. Unlike traditional linear television, it won’t remind you when an episode is released, it’ll watch the series with you and unravel it just like its viewers do. Its customers aren’t just interest in being entertained, they like being part of a collective interest within their online community. As humans, we like to be divided in to groups, and we can see this need for more nuanced content in the streaming wars.  

Disney Plus (Disney) 

The Business

Disney have been busy pulling their content from rival platforms over the last few years, and viewers have been arriving in their droves to Disney+, bolstered by government-imposed lockdowns. Coronavirus couldn’t have arrived at a better time for Disney’s streaming arm (it has significantly affected its theme park revenue, merchandise sales and movie theatre tickets). But even losses from theatre releases like Artemis Fowl who were denied multiplex releases can be recouped by being repurposed and utilised on the service. Fortuitous timing and an iconic brand name have spurned the exponential increase in subscribers to 50 million since its launch in October, a feat that took Netflix almost seven years. Guggenheim Securities is confident that Disney’s momentum will continue, projecting for the service to reach 226 million global subscribers by fiscal year end 2024.

The Marketing

Disney’s over-aggressive marketing prior to its launch last year pushed people to the site that at first resulted in outages, but for the most part customers have been flocking to the platform with few issues ever since. Marketing for the launch was made all the more sweeter by the conglomerate’s subsidiaries such the TV networks ABC, ESPN, Freeform, and FX. In terms of its offering, the entire Disney catalogue is available along with original content. But what they’re really offering is nostalgia; Disney+ is an extension of people’s childhoods, a virtual gateway to their magical, mythical universe that up until now could only be accessed through its theme park gates. Although new additions like The Mandalorian have been successful in its own right, Disney’s advantage is its extensive catalogue that it is repurposing to remain relevant and to reach a wider audience. In a radio interview, its CEO Bob Iger remarked that Disney+ “is the answer to today’s consumer’s dreams.” He’s right, customers have an affinity with its characters already, making it an easy sell. What makes it easier is its $6.99 price tag compared with Netflix’s $12.99.

For now, everyone has their problems; entertainment conglomerates tugging their content off rival platforms in search of a slice of the pie they themselves are feeding (Disney), and of course the darling, streamer dreamer who has set their sights on Hollywood, whilst also trying to cling on to their hard fought share of the market (Netflix). It’s clear how marketing that is aligned with your brand and offering will be the competitive advantage going forward as the streaming wars continue to escalate.

Part Two will examine Prime Video, Hulu, HBO MAX and Peacock.

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