Cinema may find itself an unlikely beneficiary of the battle to de-throne Netflix as the leading global content streaming business, writes Matt Hamilton, Head of AV, Wavemaker
Imagine a world without Netflix. For those of us over the age of 20, it’s not so difficult. But for most of Generation Z, which has come of age in a world where unlimited entertainment is just a click away, the concept of renting a VHS from Blockbuster would seem positively alien.
In just a decade, Netflix – a company that began life as a humble DVD rental by mail service – has managed to catalyse a sea change in how we consume entertainment. Twelve years since it began its transition into a streaming service, there are now dozens of similar options available and around half of all UK homes subscribe to at least one of them.
But with the recent launch Disney +, Apple TV and BritBox, which exclusively features shows of British origin, it begs the questions – is there too much choice for users now? And, more importantly, could that choice eventually drive them back to the cinema, or the comfort of regularly scheduled programming?
The pretenders to the throne
Whilst Netflix is certainly the biggest kid in the classroom, with its rivals making more noise of late, the next 12 months should prove very interesting as far as the ‘streaming wars’ are concerned.
Though it hasn’t officially launched in the UK yet, Disney + is already off to a flying start in the US, and hopes to have 90 million subscribers by 2024, thanks in no small part to the hype behind Star Wars tie-in ‘The Mandalorian’.
Apple TV+ has had a harder time finding its audience, despite spending over $15m an episode on original programming and hiring mega-star Jennifer Aniston to star in its breakout drama ‘The Morning Show’. However, it is believed Apple TV is mainly interested in hardware sales, bringing in new customers to Apple devices, protecting relationships with existing customers and generating incremental revenue from them. So, in fairness, it does not necessarily need to dominate the TV space.
Amazon Prime is a much more viable competitor and has even made the move into exclusive sports broadcasting in recent months – something that might just prove to be the feather in its bonnet. But with 160 subscribers and counting, it’s Netflix that sets the standard.
Hail to the king
Netflix is not only the progenitor of the streaming kingdom but remains the most popular, with market penetration in the US of 90%. However, eMarketer has estimated that this rate could drop to 87% by the end of the year, as the competition starts to really flex its muscles and audiences are torn between the content they want to watch and the services they’re willing to pay for.
Spurred on by the ‘golden age of television,’ the brand has doubled down on its original programming in recent years, spending $14bn this year on original shows and movies. Thanks to critically-acclaimed original shows like the zeitgeist-defining ‘Stranger Things’, the company has made a sizeable mark on pop culture.
Its enthusiasm for original content might have backfired, however, as it is now spending far more on original content than it’s getting back in revenue. In order to combat this, price rises have become unfortunately common. Could introducing advertising into the equation be the next logical step?
Netflix has always been eager to decry such rumours, and it’s easy to see why, given that 57% of subscribers have said they would immediately cancel their subscriptions if ads were introduced. But how many of those users would actually pull the trigger? It would certainly be a bold and calculated risk, but if bringing in ads meant Netflix could charge a lot less for a monthly subscription, it might be enough to swing subscribers.
What this means for advertisers
The streaming wars have undoubtedly unsettled the advertising industry. After all, with the vast majority of streaming services focusing on ad-free content, where does that leave marketers? If paid streaming services completely supplanted traditional television platforms, advertising could disappear from our screens entirely.
Still, there were whispers earlier this year that Netflix was considering introducing ads, and whilst these proved false, industry experts have suggested that Netflix will have no choice but to start running ads if it wants to remain top of the streaming pops. And if Netflix considers an ad model, it’s surely only a matter of time before the rest follow suit.
It also seems unlikely that traditional channels will fade. Whilst certainly facing challenges, they still form 70% of ‘TV time’ in UK households, according to Ofcom. And when it comes to original homegrown productions, the UK’s four main public service broadcasters deliver significantly more content than their streaming rivals. So, whilst the way we watch TV is changing, traditional broadcasters still have a vital role to play, and that will be music to the ears of marketers.
The idea that all streaming platforms might one day join forces to create ‘one platform to rule them all’ is unrealistic. That being said, the BBC, ITV and Channel 4 managed to mend fences to bring us BritBox, so maybe a future where we don’t have to juggle subscriptions to keep up with our favourite shows is not such a fanciful concept? It’s certainly a service many would be willing to pay for.
The more likely scenario is that we’ll start to see more traditional broadcasters and streaming services joining forces, as was the case with Sky and Netflix. Prior to Netflix, Sky was arguably the most visible disruptor in the TV game in the UK, after it popularised DVR technology – a move that significantly impacted advertisers by enabling viewers to record shows and skip adverts.
Sky has always been a proud disruptor and has itself also started dipping into quite ambitious original content in recent years too. It’s unlikely to be long before Virgin Media decides to get in on the action. This will lead to a culture of over-choice, which for some might be liberating but for others could prove quite exhausting.
The curse of choice
With 44% of consumers who pay for an online streaming service having at least two subscriptions already, BritBox is just the latest in a long line of streaming ‘options’ for consumers that might prove the final straw for some. It might not even be strictly necessary, as iPlayer, All4, and ITV Hub are already free and incredibly popular.
The only other thing BritBox has to offer besides what’s already available on live TV or other, more fully-featured platforms, is legacy and nostalgia entertainment. There is no original content to speak of – people are just paying for what they already have access to elsewhere. With a recent study finding that 60% of Brits would be unwilling to pay more than £20 a month on streaming services, we might be reaching a saturation point.
With so many competing services to choose from, it’s no wonder so many consumers have chosen to retreat to the cinema. Despite many industry insiders predicting that streaming would prove the death knell of the good old-fashioned movie theatres, the cinema is in fine fettle, with record numbers being drawn to ‘event’ films like the Avengers and Star Wars movies. It’s not surprising, then, that the most recent IPA Bellwether report recorded an uptick in big-screen advertising spend.
Even niche feature films like ‘Joker’ have been drawing people in their droves and Netflix’s recent experiment with Martin Scorsese’s ‘The Irishman’ proved that people are willing to make the effort to see something on the big screen, even when they have the option of viewing it at home. We will more than likely see more experiments and partnerships like ‘The Irishman’ in the coming years, as cinemas and streaming services start to use one another to promote yet another choice – whether to watch the latest release at home or at the cinema.
Despite all the disruption of recent years, cinema has remained healthy because it can offer two things no other platform can: a shared experience and exclusive, blockbuster content. We’re still many years away from the day when Netflix and their ilk will be able to circumvent the cinema entirely and go straight to streaming. Yes, Disney has experimented with this model (‘Lady and the Tramp’), as has Netflix (‘Birdbox’) but these are exceptions that prove the rule. Audiences will always demand a theatrical release and content will always reach the cinema first.
That’s what it’s all about, ultimately – content. It’s not the brand, the platform or the price that sells people on a streaming service – it’s what those platforms have to offer that truly interests viewers and as long as that remains the case the streaming wars will continue to rage.