The streaming war is about to begin for real — what it means for consumers and the industry
The streaming wars are about to begin after years of preparation. Everyone is watching. Nobody knows how it’ll end. Stay tuned.
On Nov. 1, Apple TV+ will launch globally and start rolling out prestige television shows on a weekly basis. Subscribers paying $5.99 month can watch dystopian action series “See” or see Jennifer Aniston, Reese Witherspoon and Steve Carell in “The Morning Show,” a drama that reportedly has a budget of US$300 million for two seasons.
But any hype around Apple’s offering will almost immediately get swamped on Nov. 12 with the Canadian launch of the Disney+ streaming service, which is expected to parade old Disney animated movies, along with new television series from both the Star Wars and Marvel Cinematic Universe franchises.
The Apple and Disney subscription streaming services will join a market already occupied by Netflix and Amazon Prime Video. In the United States, the landscape is even more complex: AT&T TimeWarner is preparing to launch a streaming competitor called HBO Max and NBCUniversal will launch Peacock, joining CBS All-Access already online.
There are different ways to draw the impending battle lines. From one angle, it’s the legacy television players versus the upstarts, albeit deep-pocketed ones. From another, it’s pure-play entertainment companies such as Netflix and HBO versus value-add services meant to bolster a larger brand like Apple or Amazon.
Either way, though, now is the moment for Amazon, Apple, Disney, HBO, CBS, NBCUniversal, Netflix and others to grab a slice of the future of entertainment, or get left behind as the legacy broadcast and cable television market makes way for the new frontier of direct-to-consumer streaming.
Of course, when it comes to streaming, like with so many other things, the Canadian version will be a little bit different, and less spectacular than south of the border.
For instance, nobody is quite sure exactly what will be initially streaming on Disney+ in Canada, said Brahm Eiley, founder of Convergence Research Group, which tracks internet, telecom and content offerings.
“We don’t know yet everything about Disney, but we will know soon, right?” Eiley said. “All the originals are global from day one, so we’re really mostly talking about library, that’s what differs at the end of the day.”
The online streaming rights for various movies and television shows are a patchwork of country-specific licencing deals, with many long-term contracts signed years ago, before the streaming wars began.
As the various companies jockey for position in the lead-up to the streaming wars, much of the attention has been focused on securing rights to various legacy products. NBCUniversal reportedly spent US$500 million to re-acquire rights to “The Office” and HBO Max reportedly shelled out US$425 million for “Friends.”
In Canada, however, the presence of Bell Media’s Crave rules out several major companies getting in the game, at least for now. For example, Crave is currently the home for HBO content, thanks to an agreement signed in 2014, shortly before Crave launched, and then extended in 2018.
“There are no plans at this time to enter Canada with the HBO Max streaming service or change how HBO content is available in Canada,” a spokesperson for HBO said in a one-line email.
NBCUniversal’s Peacock has no plans to launch in Canada either. And although CBS All Access is technically available in Canada, some of the most exciting CBS shows such as “Star Trek: Discovery” and the forthcoming “Star Trek: Picard” are absent from All Access here, because Crave already owns the rights to those properties.
Tracey Pearce, Bell Media’s president of distribution and pay who directly oversees Crave, said the streaming service got a major boost earlier this year from people signing up to watch the blockbuster final season of the HBO show “Game of Thrones.” She said Bell has been working hard to build an enticing library of content to keep those people, and grow the service.
But Pearce also said Bell doesn’t really know where the streaming entertainment market is going. She suggested the company wants to maintain a viable presence in the space, but it also needs to strike a balance so it doesn’t cannibalize existing television subscribers.
“In terms of where Crave sits relative to CTV, relative to the Bell Media specialty channels, I think that we are continuing to invest and support our core channels in each of those spaces,” she said. “We are not in a place where we’re throwing overboard our specialty channels or our conventional channel business in favour of Crave.”
However, Kaan Yigit, president and research director at SRG, a Toronto-based consultant that tracks trends in television and video entertainment, said he’s skeptical of Crave’s future in the wider entertainment landscape since the real juice for streaming services will come from exclusive, original content, despite the initial focus on catalogues of old movies and television shows.
Unlike the big U.S. players, Crave is only developing a handful of original shows and movies.
“Crave is all rental properties, and Bell isn’t, in my opinion, fully committed. And they don’t have the scale,” Yigit said. “Crave is doing okay, but, you know, it exists in a market of 30 million people on its own. Amazon and Netflix, they’re thinking global. They’re amortizing their costs globally. Apple will do the same thing. Disney is ultimately intending to do the same thing.”
Amazon and Netflix, they’re thinking global
Kaan Yigit, president and research director at SRG
People might subscribe to a streaming service to binge old episodes of “The Simpsons” or “Seinfeld,” but original series such as “House of Cards” and “Stranger Things” have been far more important in generating buzz for Netflix over the long term. Apple, meanwhile, is betting its entire service offering on original shows, since it doesn’t have a library of legacy TV and movies at all.
The buzz about streaming is clearly growing. Home entertainment spending globally hit US$55.7 billion in 2018, according to a report by the Motion Picture Association of America, and the number of online video subscribers passed cable subscribers for the first time, although cable television still rakes in much more money.
Speaking to investors following a recent earnings call, Netflix chief financial officer Spence Neumann said that the price to acquire the most sought-after television shows has jumped by 30 per cent in just the past year.
Netflix plans to spend some US$15 billion on content this year, while Apple, Disney, and Amazon are each reportedly spending billions as well, and that means more projects, and more work.
David Coatsworth, a Toronto-based producer and production manager who’s worked most of his career with HBO on shows such as “John Adams” and “Fahrenheit 451,” said the industry was like “the Wild West” a couple years ago, as new players ramped up production, but they have quickly matured into conventional production companies.
“All across Canada, Montreal, Toronto and Vancouver are bursting at the seams, and the volume of production going on worldwide, it’s unprecedented,” Coatsworth said.
“I’ve been in the business for a very long time. My skill set is in more demand now than it’s ever been. There’s only a finite number of people who actually know how to do what I do, and I know a lot of the people in my business. We’re all extremely busy.”
Coatsworth said major companies are signing multi-year leases and building out major production facilities, which indicates that the current flurry of activity isn’t going to be a flash in the pan.
Industry experts agree the streaming wars are not going to be a one- or two-year affair. For one thing, it will likely be half a decade before it becomes clear which companies are dominating the market, and which ones can’t compete.
Deep-pocketed companies such as Apple and Disney can invest heavily and price aggressively to grow their market share. Moreover, Apple is offering its streaming service for free for a year to anybody who buys an Apple device, which will boost viewers even if its library remains small at first.
It will likely be half a decade before it becomes clear which companies are dominating the market, and which ones can’t compete
Where Amazon fits into the landscape is particularly complicated, because Prime Video is not a standalone product. “When we win a Golden Globe, it helps us sell more shoes,” Amazon chief executive Jeff Bezos famously quipped in 2016.
Market dynamics are also likely to change before all of this is over.
Both Eiley and Yigit said Canadians have been slower than Americans when it comes to ditching traditional cable packages, but the cord-cutting is likely to accelerate as subscription services ramp up.
In the short term, one factor likely to keep people tied to the traditional television ecosystem is live sports; in many cases, there are no legal options in Canada to pay just for online streaming of pro sports. But that may change as streaming becomes a more dominant form of content delivery.
Another layer of complexity to consider when assessing the changing market is that unlike traditional television, none of the major streaming services are supported by ads, which radically changes the business model.
As profitability pressures mount, some companies may shift to a partially, or fully ad-supported model, said Eric Schmitt, an industry analyst for Gartner focused on TV and digital advertising.
“The advertisers badly want to be in this media to get in front of these consumers, and consumers don’t have unlimited budgets for discretionary entertainment like this, so you’ve gotta think it’s going to find a balance point,” he said. “These algorithmic systems that are basically tailoring the ad load to our own individual tolerance level are going to play a big part in this.”
At least for a while, the best way to look at the streaming wars is as a possible new golden age for television and film as studios invest billions of dollars to produce ambitious, prestige entertainment, and then offer it to consumers ad-free, on-demand and at prices far lower than a typical cable bill.
Ultimately, the real streaming wars may be the fight between legacy television players and digital direct-to-consumer streaming services.
Indeed, Netflix chief executive Reed Hastings noted earlier this year that the competitive landscape as of November will be “a whole new world,” a wry nod to the song in the Disney movie “Aladdin,” though he later downplayed the competitive threat from Disney and other new entrants.
“I was being a little playful with ‘whole new world’ in the sense of the drama of it coming, but fundamentally it’s more of the same,” he told analysts after announcing third-quarter results. “All of us are competing with linear TV; we’re all relatively small to linear TV.”