It’s been a busy week of news in the world of streaming video services.
Two massive companies announced offensive moves in the market. AT&T held an “upfront”-like event to announce the timeline for the rollout of its HBO Max services, and Apple’s CEO Tim Cook announced the launch and pricing of its TV+ product.
Two other massive companies announced their retreats from the market. Sony shut down its PlayStation Vue service, while The Information reported Walmart has decided to sell its Vudu service.
For streaming video services, competing for subscribers is not for the faint of heart, even for companies with market capitalization in the hundreds of billions of dollars.
What gives? Why are we seeing such big casualties so quickly in the still-nascent Streaming Wars? Here are my thoughts:
Great video content
is really expensive and risky, getting more expensive — and takes a lot of time to make. Though some might believe that it can be done otherwise, making great video content is expensive. The
process is fraught with failures. It is getting more expensive, even as more and more buyers line up to buy more content.
Producing such content also takes a lot of time — years and years from planning and production to consumer release. You’d better have a lot of expendable risk capital — billions and billions over many years — if you want to play in this world with any hope of surviving, let alone winning.
All about customer scale. Both Playstation Vue and Vudu have/had subscale customer bases that aren’t growing much. That’s mutually exclusive with the production and marketing costs of premium video services. Go big or go home. Sony and Walmart are both heading home.
No unfair — or even clear — competitive advantage. As I learned in my first venture capital pitch, if you want to win in highly competitive, dynamic markets, you’d
better have an unfair competitive advantage.
Netflix built a streaming service flywheel first with a brilliant market-entry strategy (mailing DVDs with no late fees). Amazon gives video away for folks to pay for free shipping. Apple bundles video with premium-priced hardware. If you have no substantial edge, you have no chance to win.
The Streaming Wars will be bruising and long — very, very long. All the companies seeking subscribers to video streaming services have balance sheets to lose tens and tens of billions before they need to make their businesses profitable. All will subsidize their customer acquisitions and early years of subscriptions to capture early market share. It will not be pretty for anyone — other than viewers, and those who sell “picks and shovels” to the streaming services, of course!
At least one of the streaming winners is a company
we haven’t even heard of yet. On top of the four reasons above, I would bet most folks in the market recognize there’s likely to be even greater disruption in the fight for streaming
subscribers from one or more companies that we don’t even know about yet.
As we have seen time and time again, two kids in a garage can build massive businesses in
highly competitive markets through innovation and invention, seemingly out of nowhere.
I would bet you, in five years we will find at least one of the top four global video streaming services will be from a company that isn’t even on our radar today, and is probably working on a shoestring budget.
What do you think? Is there a massive video streaming service being quietly cooked up in someone’s garage today?
Dave, the actual amount of time people spend with streaming content, while growing, remains relatively low compared to the totality gained by "linear TV" programs. Moreover, much of the focus of the streaming programmers, where original fare is concerned, is on high risk, "premium" content which creates a serious imbalance in the total sustainable menu as most people can take only so many hours a week of high intensity fare before burning out on the genre. This is why large numbers will continue to rely on "linear TV" for news, talk,sports, etc. thereby creating a limit on subscriber interest for many of the new streaming services and a distinct advantage for those---like Disney and Comcast, which offer more diversified program lineups by virtue of the inclusion of many basic cable channels, plus broadcast network fare of many types and local station news content. I think that the streaming wars will soon turn into a huge bloodbath as many of the "me toos" are weeded out and I aslo see a lot of merging and purging which may ---I repeat, "may"---result in combinations of services and coalitions of "partners" that we can only dream about now.