This week Netflix was nominated for 15 Oscars – demonstrating that it is a serious competitor to the traditional cinema industry.
It comes in the same week that they announced that they were increasing prices for their subscribers. Furthermore, Netflix has recently claimed that their non-US subscribers have risen dramatically over the past month.
However their formula for measuring their own popularity has been called into dispute in the past. They claimed that Birdbox was watched by 45 million ‘accounts’ in the first week of its release, but this was measured on viewers watching 70% of the movie – compared to normal viewing statistics which tend to only count full views.
My thoughts on this are the following (most of which I don’t have answers to!):
– How can we compare the popularity and market trends of streaming services such as Netflix when they calculate (and possibly inflate) their own popularity rather than it being objectively measured?
– Are online streaming services even as popular as we think considering that their viewing statistics are not the most trustworthy?
– That being said, Netflix is clearly much more popular than its competitors (Hulu, Amazon Video etc). So, do we risk seeing a monopoly of the movie market in the coming years? What does this mean for consumers?
– Does this mean that they should be more regulated?
– Should online streaming service films be allowed to be nominated at the Oscars, which was originally for cinema feature films?
Super interesting with respect to streaming services measuring their own success. Is there any way streaming service statistics can be “checked” or “verified” or “audited” by an outside/neutral third party? I would think the market could (and hopefully will) come up with a solution to this problem prior to regulation having to stepping in on that front.
Regarding Netflix potentially being a movie monopoly, I think that’s an interesting question and a good one to keep an eye on. However, I think it’s far too early to sound any sort of alarm on that just yet. Netflix was the first streaming service to become a behemoth in the cord-cutting age (and, probably is largely the reason for it or at least a huge catalyst of it), but there seem to be exceptionally worthy competitors on the move.
Two of the competitors are painfully obvious, and, both were mentioned above.
First, there’s Amazon Prime Video which, though not nearly as popular as Netflix, is already a large player in the space. I would warn against mocking Prime Video just yet as I actually think they might be poised to surpass Netflix over the next ten years. This is because 1) Amazon is huge, much larger than Netflix, and so they can throw tons of cash behind their streaming service, 2) Amazon is known to constantly experiment with new things and for being extremely customer-centric – these two things combined make me think that eventually Prime Video will become exactly what consumers want (already, I know, they let Prime members vote on various scripts to determine which one they will turn into a movie), 3) Jeff Bezos, and Amazon by extension, is known for having the longest view in the room, in fact, his motto is “your margin is my opportunity” and so maybe, just maybe, he has a plan to effectively undercut Netflix over the long haul, and 4) Amazon Prime members automatically get access to Prime Video with their subscription, so if and when Amazon Prime Video hits it out of the park with an amazing title, they have over a 100 million people who are already signed up and pay for the service and just need to start using it. Netflix, by contrast, has just over 137 million members, I think.
The other major competitor is Disney, which is supposedly rolling out its own direct-to-consumer subscription platform in 2019 while pulling all its titles from Netflix. Clearly, this is a competitive play. And, with Disney’s acquisition of Fox, even more movies (and movie-making power) will be put onto Disney’s platform and taken away from Netflix’s. To say the least, Disney is a huge huge player in the film industry and it is going to be fascinating to see what happens – what their user growth and numbers will be, how well their platform works, how they release new titles (some just to the subscription service?), whether anyone cancels their Netflix subscription. I can’t wait to see what happens here.
I also think platforms like YouTube (and probably a third competitor to Netflix that will pop up) will start to be a place where movies can be uploaded, monetized in some way, and available to a broad audience. This may be the place where movies not picked up by Amazon, Netflix, Disney, etc. go to be available to the streaming public.
So, bottom line, I’m not sure what the future of movies in the streaming age will look like, but I do think there will be very worthy competition for Netflix. Whether Disney sinks or swims will shine a lot of light onto this question. In the end, perhaps we will have an oligopoly with four or five major players (like the situation with telecommunications companies). Perhaps we will have a competitive landscape similar to that in search with Google owning like 70-90% of the market share and a few other search engines hanging around. Now that I think of it, I think this last possibility is fairly likely, since, well, how many subscription services are consumers willing to pay for? And, Netflix was there first…
So much to see. What a time to be alive!
Great discussion. All of these differing perspectives & points may be helpful tomorrow when, in a special News of the Week of the week segment we will focus on one interesting direction Netflix seems to be heading. A direction that may make them that much harder to regulate. Stay tuned…
With the growing popularity and influence of Netflix and the fact that it is currently unregulated in Canada as compared to traditional programming providers, it seems that this gives the online streaming platform an unfair advantage. Accordingly, it would be beneficial for regulation to be put in place that ensures Netflix’s formula for measuring popularity and viewing statistics are transparent to its content creators and wider public as a whole. Although the characteristics of Netflix are quite distinct from traditional film and television programming industries (specifically its online, on demand viewing features), it would be inappropriate not to subject Netflix to a similar regulatory framework as its traditional counterparts to ensure strong market competition and the prevention of an inexorable monopoly.
Why do you believe the advantage to streaming services is “unfair”? Since the growth in popularity of streaming services, many television networks have introduced on-demand online services which can stream the shows they have previously broadcast. In other words, they have tried to capitalise on the success experienced by companies like Netflix. To introduce regulations akin to those applicable to television networks would impede long-term innovation. My point is essentially that Netflix should not be penalised because they made use of available technology just because television networks refused to innovate and charged higher prices. In relation to competition, all that this shows is that television networks are not competitive with a company like Netflix in the era of the internet – so why should they be protected? Is it not the essence of free market competition that non-innovators will eventually be driven out of the market?
Interesting discussion, Eloise. I’m not sure I entirely agree with your definition of Netflix as just a streaming service. The introduction of “Netflix original” series (2013, House of Cards) and movies (2015, Beasts of No Nation) was an overt move towards becoming more than simply a streaming service, which was a copy of Hulu (which did this in 2011) and was copied by Amazon (2015). The fact that these ‘original series’ are encompassed within streaming services reflects an attack on the cinema industry and television broadcasting more generally and perhaps should lead to calls for greater regulation.
However, in my opinion, this is no reason to simply exclude ‘streaming services’ from e.g. Oscar nominations – such a move would be anti-competitive. There is no parallel ban in relation to films produced by television networks – for example, take “Black Panther”, a recent nominee. This was produced by Marvel Studios, a subsidiary of Walt Disney Studies, owned by The Walt Disney Company – which also owns television channels ABC and ESPN. Online streaming is the post-millenial successor to the cinema and it is a corollary that films produced by streaming services, as they seek to expand their into different markets in the same way as Walt Disney (for example), should be considered for Oscar nominations.
I do accept, however, that streaming services are not currently regulated in the same way as television networks. I think the more controversial question is whether they should be regulated in the same way, which I am sure will be discussed.
Really good points, David. I also want to add that Netflix is far from achieving monopoly status in either the streaming platform industry or the movie industry. As you mentioned, there are other upstarts like Hulu and Amazon Prime Video. Though much smaller than Netflix in terms of subscriber number, they still command considerable market share. There are also streaming services rolled out by traditional media and television networks such as HBO Go, the upcoming Disney+, WarnerMedia Streaming, or Crave in Canada. It is a crowded field and will be even more crowded as time goes on. In fact, my prediction is that we will see consolidation in this space in the next three to five years. When it comes to original content, Netflix faces even more competition. Disney is a behemoth in this space, producing half of the ten highest grossing movies of 2018 I believe. There are also old players like Warner Bros, Universal Pictures, and Paramount Pictures. It is true that we do not have a good way to compare viewerships of Netflix Originals with these movies released in theatres, but reports have shown that some of the most popular titles on Netflix are still licensed ones from other studios. To their credit, Reed Hastings and his leadership team at Netflix realized that content is king a few years ago, and have since then been aggressively pursuing original content by burning billions of cash every year. But they are on their way to try secure more content and grab more market share, and they are far from dominating the space.