The battle for peak TV has just begun

Netflix ended the quarter with a cliffhanger. Well, not really. They just fell off a cliff. International growth stalled and they lost a net 130,000 subscribers in the US.

According to CEO Reed Hastings, this is why (paraphrased):

We think Q2’s content slate drove less growth in paid net adds than we anticipated. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2.

So according to Hastings, people just didn’t like their shows. Which makes sense, I didn’t watch anything notable on Netflix besides Our Planet. But his statement contains a contradiction. If shows are what matter, then of course competition is a factor.

It’s not like people stopped watching TV. We watched Game Of Thrones (HBO), Chernobyl (HBO) and Good Omens (Amazon). They just weren’t on Netflix. If that’s not competition, I don’t know what is.

Hastings said the competitive landscape hasn’t changed, and that may be narrowly true for Q1. Right now Netflix is only fighting on one front — mostly against direct competitors and also HBO. Over the rest of the year, however, a whole new front is opening in the video wars.

Netflix is going to war with its suppliers.

Shots Fired — 2013

Netflix began as a mail-order DVD store. A distributor. Then it began streaming. Still a distributor.

Then, in 2013, they did something revolutionary. They began producing their own content, starting with House Of Cards, then accelerating towards $15 billion dollars this year. This is a bit like a drug dealer cutting off their supplier and going straight to Columbia. It’s prone to start wars.

There must have been a lot of board meetings at Disney and NBC in 2013, wondering what the hell was going on. This is how Hastings described the journey, and where they ended up:

We’ve been moving our content from semi-exclusive catalog and 2nd-window unbranded content to branded exclusive 1st window original content for many years. Much of our domestic, and eventually global, Disney catalog, as well as Friends, The Office, and some other licensed content will wind down over the coming years, freeing up budget for more original content.

This is a bit like saying your girlfriend breaking up with you frees up time for masturbation. You could say that Netflix fired at the studios first, or that it was a pre-emptive strike, but either way, shots were fired.

The Battle Joined— 2019

While Netflix has produced amazing original content, they cannot compete on that alone. Even if Stranger Things 3 is a hit, consumers still want choice. 92% of Netflix’s inventory is still produced by suppliers. That’s all going to change over the next year.

Over the next 12 months, Disney, Apple, WarnerMedia, NBCU and others are joining Hulu, Amazon, BBC, Hotstar, YouTube, Netflix, and many others in offering streaming entertainment. The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers. (Hastings)

Unfortunately, that last part just isn’t true. There are a lot of cool shows coming out, but the user experience isn’t great for consumers at all.

Civilian Casualties

I’m a consumer. I just want to Netflix and chill. However, as you get more and more services, it becomes more and more annoying. Netflix and Amazon and Hulu and Disney and BBC and Apple is NOT CHILL.

As a consumer you now need a dozen subscriptions to keep up. And every time a new service comes out, the other services get worse. Disney+ just subtracts content from Netflix, and doesn’t have the Netflix shows. You go from one product that had everything to two products that each have half.

Personally, I’m so confused by all the streaming options that I’ve gone back to piracy. I pirated Good Omens because I didn’t know I already had it (on Amazon Prime). Christian Extremists didn’t even know which network to boycott.

Consumer just want to veg out and watch TV. However, no one is even competing to be the new TV right now. They’re all competing as TV channels.

The War

And that leads us to the future. A holy content war as your pay TV subscription tears itself apart and all the channels start fighting each other. A war on three fronts — Netflix vs. other streaming services, Netflix vs. their suppliers and Netflix vs. pay TV. And the waters, of course, are full of pirates. In addition to all the great drama they produce, the competition is a drama in itself.

Do I know how it’ll end? Lol no, I’d be in finance. I’m just a consumer. I’m just here for the show.