Netflix, the US-based Over The Top (OTT) streaming platform is expected to face rough weather ahead. Majorly focusing on the content-leasing model, Netflix has been a major success story. It was basically a replication of sharing economy like Uber where the company uses the resources of other people/companies to make money. The only thing that requires for such companies is strong technological support.
Reed Hasting, a computer science postgraduate from Stanford University anticipated this boom in sharing economy and capitalized on the opportunity and made billions for him and the investors. The share of Netflix has soared by 8500 percent in the last decade. Presently, Netflix boasts of 149 million paid subscribers, beating every cable company in the United States. The company destroyed the business of cable TV operators in the United States and many other companies. The most famous casualty of Netflix would be the video rental services like Blockbuster.
However, it seems that the good days of Netflix are over. The mass media companies whose content Netflix used to make money themselves are stepping into the streaming business. And given the highly concentrated character (top six companies own more than 90 percent of mass media) of American media, if few largest companies pull out their content, the streaming business will collapse. Disney, the second largest media house which owns the majority of popular shows and movies on Netflix, is planning to launch its own streaming platform named Disney+.
Disney has said that the company would remove all the content owned by the company from Netflix by the end of this year. These shows and movies could be viewed on Disney’s streaming platform which will charge 6.99 dollars per month. The subscription charge of Disney is half of Netflix and if the subscribers do not get the best content, they will prefer to move to Disney+.
Disney is not the only major media house which is launching its own streaming platform. Another giant named AT&T, largest telecommunications company and the largest provider of mobile telephone services which entered in mass media through the acquisition of WarnerMedia will also launch its own streaming platform by 2020. Its platform will cost 16-17 dollars per month but given the fact, some of the popular shows and movies are like The Sopranos, Game of Thrones, and Sex in the City and the highly popular sitcom Friends are owned by it, the consumers are likely to switch loyalty, adding to Netflix’s woes.
Moreover, Disney+ would rob Netflix off of many extremely popular movie titles as well. Disney is a behemoth which owns several big production houses including 21st Century Fox and Marvel Studios. This year’s top three best-performing movies were all from production houses owned by Disney. Similar was the case for the last year as well. Many of the titles are currently available of Netflix but once Disney+, the titles will shift to the platform only further damaging Netflix.
The slew of planned streaming platforms by major media houses will be a double whammy for Netflix. It will not only lose the most popular contents but it will also lose major releases by big production houses. The company enjoyed near monopoly like situation in the last decade and now it will face strong competitors. According to analytics firm Jumpshot, more than half of the most popular shows on Netflix are owned by other major media houses.
The investors’ trust in the company so far is the only saving grace. The company plans to lose the purse strings to spend on content creation. The company spent 12 billion dollars on content creation last year and plans to spend 15 billion dollars next year. The company’s debt soared by 58 percent to 10.3 billion dollars due to heavy spending on content creation. However, Netflix cannot compete with Disney, HBO or other major media houses which have well-established brands and robust infrastructure for content creation.
The company must plan out a strategy to hold on its 149 million strong subscriber base. So far, the streaming service seems to be relying on sweepingly extending its original programming, however, considering The Office (owned by Disney) is still the most popular show on the streaming platform despite a number of originals shows, Netflix is surely going to feel the pinch of major media houses withdrawing their content.