Variety; TV’s New Big Four: Netflix, YouTube, Disney and Amazon Dominate as Streaming Wars Enter New Phase

Story from Variety:

I bet every time someone says “The streaming wars are over — Netflix won,” Ted Sarandos rolls his eyes. Sure, it’s flattering — but is it productive? In July, Netflix surprised Wall Street by declaring that they and YouTube were “the clear leaders in direct-to-consumer entertainment.”

YouTube and Netflix compete for time spent, consumer dollars and now advertising. Their revenues and profits are comparable. But they approach streaming from vastly different positions, leveraging unique strengths.

The streaming wars are evolving into multiple fronts. Through Streamonomics, we can analyze which “weapon” is suited for which battle. But to get a more complete picture we, at least, must also look at Disney and Amazon. Though they started later, and thus still have to grow into the economics of the top two platforms, both have strengths that are tough for competitors to replicate. Collectively with Netflix and YouTube, they form what I call the Streaming Four.

As a first-mover in streaming, Netflix has built several strengths. It’s a pure-play company, with the highest reported profits in streaming. Its unit economics are enviable: more subs at higher ARPU (of which they keep 100%) and longer lifetimes, watching more hours — all with the lowest unit cost (as in cost per thousand viewing hours, bar YouTube).

The hardest-to-replicate strength is the Primacy Effect: Netflix is the first answer to “What should I watch?” Thanks to its sophisticated algorithm, data dominance and a constantly updated slate of compelling content, Netflix captures that key moment of decision for hundreds of millions of viewers globally.

They may not be everyone’s first choice, but they pair that primacy with the ability to keep their viewers engaged longer. Netflix has continuously expanded their product offering —from licensed content to first-run originals, multiple languages, unscripted series, now live. When they say “we’re not religious about…” it’s often a signal of their next strategic leap.

Every month, 2.5 billion people watch YouTube — 80% of them daily. And they watch a lot of it. This advantage stems from four pillars: (1) a “freemium” model (2) intentional approach to desktops, mobile, and TV (3) format flexibility (from shorts to movies) (4) a creator-driven model that reduces creative risk while giving the product more urgency.

While Netflix is the first answer to the question “What should I watch?” YouTube is often the second — or for many, the first. Additionally, YouTube is the first go-to for gaming videos, highlights, clips, tutorials and video podcasts.

It’s fair to say YouTube is in a different category: it’s an open platform, where videos created a minute ago by anyone can get out immediately, feeding that sense of urgency. By contrast, any curated platform will take a longer time between creation and discovery.

However, the lines are blurring. True, YouTube did stop creating original TV shows, yet it had no problem spending $2 billion per year to land the NFL Sunday Ticket game franchise aimed at high-end and devoted consumers of pro football games. Shows that started on YouTube, including “Cobra Kai” went on to have huge success on Netflix. And YouTube just announced a new update that will allow creators to better present serialized shows, signaling the battle lines will keep moving.

Where the other three rely on a single brand, Disney commands the most powerful portfolio of media brands globally —along with their respective libraries and creative engines. I’m talking about Disney, Marvel, Pixar and FX, and these are just the top four. In addition, they own and continue to grow the best library of long-running broadcast shows in English, from “Grey’s Anatomy” to “Family Guy”: shows you simply can’t replicate anymore at that scale. Plus, in ESPN they have the strongest sports brand, and in hulu one of the strongest destination brands.

It’s not a coincidence that Disney owns eight of the 10 highest grossing movies of all time (of which five were launched in the last five years). Nor is it a coincidence that they took home 60 Emmys earlier this month. After Netflix, Disney generates the most subscription streaming revenue of any company, and after YouTube, the highest advertising. They just became profitable in streaming, before the full effects of the Disney+/Hulu integration, technological upgrades and price increases kick in.

Amazon Prime Video isn’t just a streaming service —it’s the largest video store globally. Beyond providing Amazon Originals and licensed shows and movies as a benefit to Prime customers, it retails 100+ channels (from Max to Crunchyroll), FAST channels and is the leading seller of transactional TV on demand. On top of that, it has must-watch NFL and soon NBA rights.

Search for any title across multiple platforms, and you’re most likely to find it on Amazon — whether included in your subscriptions, or available for purchase.

Prime Video’s recent move to turn ads on by default instantly gave them the highest global ad reach on TVs of any streamer. And uniquely, Prime Video drives spending across Amazon, turning it into a marketing engine for a $500 billion consumer business — one that’s positioned to become profitable on its own. With Amazon’s scale and advertising data, its market share as a TV manufacturer, and its ownership of the Amazon MGM Studios, you can see how their flywheel will allow them to continue to increase their share of key content rights.

For brevity, I won’t dive into the many strengths of other players, from Apple to Comcast, Paramount, WBD and others in between; I will save those for a future column.

The so-called “Streaming Wars” provide endless material, but unlike wars, which have an ending, competition is perpetual. Consumer behavior will evolve, and each battle will require different strengths, Those who understand Streamonomics will have the highest chance of building sustainable value —whether they’re one of the Streaming Four, or someone who competes with, partners with, sells to, or invests in all of the above.