Core Key Click
- "Mulan" to log in to Disney+, which is an opportunity to help Disney open the business boundaries.
- The United States has experienced three stages: radio, television, cable, and streaming . Netflix has opened the era of streaming and has become the leader through first-mover advantage and original content.
- has entered a fierce stage of streaming media competition in recent years. Netflix's competitors come from two camps: old media groups and Internet technology companies.
©Shenxiang Original · Author｜Lu Yue
Due to the impact of the epidemic, the Disney blockbuster "Mulan", which has been extremely tortuous in its release, can be finally settled.
On the morning of August 5, Beijing time, in a conference call after the release of the third quarter financial report, Disney CEO Bob Chapek announced that "Mulan" will be held on Disney+ on September 4, and the pre-screening fee in North America will be $29.99. Users in Canada, Australia, New Zealand and some Western European countries can also watch this video, but the prices are slightly different.
Previously, due to the impact of the epidemic, the release time of this film has been repeatedly postponed. Disney then estimated to rise 5% in extended trading.
"Mulan" was changed to streaming, which is Disney's first attempt to sell content on Disney+ and the first time it launches additional paid content on a monthly fee of $6.99. In the short term, this is Disney's helpless choice under the epidemic, and it is an attempt to make business returns full of uncertainty; but in the long term, for Disney, which is focusing on the streaming business, "Mulan" may be an opportunity to help it open its business boundaries.
According to data disclosed in Disney's third-quarter financial report, the coronavirus epidemic has continued to have a huge impact on Disney's parks and other businesses, with its revenue plummeting 85% compared with the same period last year. At the same time, the data of Disney's streaming business are showing a rapid development trend:
- currently has 100 million paid users, including Disney+, Hulu and ESPN+. Among these 100 million users, more than half are Disney+ users. As of the end of this quarter, Disney+'s users had reached 57.5 million, and the service was launched in less than a year.
- Chabbeck said on a Disney earnings call that as of Monday, Disney+'s number of paid users had reached 60.5 million, achieving its goal four years ahead of schedule, which is to increase the number of paid users to 60 to 90 million by 2024.
has fallen and rises, and industry trends have emerged.
Disney, which just launched its streaming service in April 2019, is a typical example of the explosive growth of the streaming industry in North America. According to a report released by Conviva, from the second quarter of 2018 to the second quarter of 2019, the viewing time of streaming media in North America doubled, with a total duration increasing by 130%. Mobile audiences increased by 2 times, and viewing time increased by 109% year-on-year.
At the same time, 2019 was also a year of extremely fierce competition. Netflix has Amazon followed closely, and the old media groups have begun to build a streaming matrix. Internet companies and technology companies have hurriedly entered the battlefield. The US streaming media market has officially entered the "white-hot" stage. Even so, players still choose to join the battlefield.
In mid-July this year, NBC Global , a subsidiary of Comcast, the second largest Internet service provider in the United States, officially launched its own streaming media Peacock. Peacock has chosen the "free + paid" model that is different from other mainstream streaming platforms. In the free mode, users can watch 7,500 hours of content including "Downton Abbey" and "I'm a Comedy", and the content that users can watch in the paid mode will be expanded to 15,000 hours. At the same time, this streaming platform has also cooperated with Comcast to open to Comcast's Xfinity X1 and Flex customers.
In addition, after Viacom, another major media giant in the United States, recently announced that it would launch another super streaming platform in 2021 based on the streaming service CBS All Access.ViacomCBS CEO Bob Bakish said a wider range of original content will become a feature of the new brand.
is a streaming media platform, but it is actually producing and selling content. If the content is successfully sold to more people, it must continue to increase investment to improve the quality of the content. But unfortunately, the content has extremely strong uncertainty, and the number of buyers of the content will also be capped.
No matter how you look at it, streaming doesn’t seem to be a good business, but why do everyone squeeze into this track?
Start with TV
The American video industry has gone through three stages: radio, television, cable, and streaming. In this development process, every new media emerges has been driven by technological innovation.
In the 1930s, radio and television, which transformed from broadcasters, emerged. After more than 20 years of development, radio and television became the mainstream of the American television industry at that time, and five national broadcasting and television networks also emerged - NBC, ABC (ABC), Fox National Broadcasting Corporation (FOX), CBS and CW Broadcasting Corporation.
These five radio and television networks belong to several major media groups in the United States. For example, NBC is affiliated to Comcast Group, ABC is affiliated to Disney, and CW is jointly funded by Columbia and Warner Bros. Backed by a large media group, the five major radio and television networks with strong technology and financial support output their own production and distribution content through affiliated terrestrial TV stations all over the country.
is a competitive viewership. The five radio and television networks each have formed different content preference styles:
- NBC is good at political themes, and its representative works are all political dramas such as " Law and Order " except for a sitcom "" and " Desperate Housewives ";
- ABC is good at family dramas, and its representative works include " Lost " and " Desperate Housewives ";
- Fox is good at suspense science fiction themes, and his representative works "X Files" and "24 Hours ";
- CBS is good at sitcoms and entertainment programs, and his representative works "The Big Bang Theory", "Hans 7 Mother's Romance " and "Criminal Psychology";
- CW is aimed at the teenagers, and his representative works "Gossip Girl", " Vampire Diary " and a large number of works adapted from DC Comics.
The biggest limitation of radio and television is that the radio wave transmission distance is very limited, and signals may not be received in remote areas. Therefore, in the 1940s, the technology of using wired cables to transmit data began to become popular, and several small American towns established their own wired networks, which well solved the problems of short radio wave transmission distance, unstable signal, and limited coverage.
Relying on its advantages beyond radio and television, it coincides with the popularization of color TV series and the government's freezing order on terrestrial TV stations. Cable TV, which has taken advantage of time and place, quickly ushered in a period of rapid development. Even when installation and use are expensive, the number of cable TV users in the United States reached 14,000 in 1952. By the end of the 1950s, 650,000 households across the United States were watching TV through 640 cable TV systems.
In addition, because cable TV terminals can penetrate into every family, the revenue structure of the TV station's revenue can only be subverted by advertising, and the core revenue of cable TV network gradually shifts from advertising to channel subscription fee income. Paid channels have begun to appear, and two paid channels HBO and Showtime have been established one after another.
As the first paid cable TV channel in the United States, HBO's performance was not good when it was first established. Because of the lack of homemade content and being restricted by the regulations that "the cable TV system is prohibited from broadcasting any remote terrestrial TV programs except local terrestrial TV stations", HBO continued to suffer losses in the first two years after its establishment, and the total number of users was only a few thousand.
Because terrestrial TV stations repeatedly lobbied Congress for restrictive policies, cable operators began to realize a weakness that must be compensated: lack of content production capabilities.
Therefore, in the 1970s when the channel dividends gradually faded, cable TV network began to make relevant layouts in entertainment, sports, movies, news and other content, and successfully drove cable TV to further develop with high-quality content.HBO has not only become a popular and controversial TV network due to its high quality and freedom of homemade content, but also attracts more Hollywood stars to sign contracts. After HBO began to produce content, series of series such as "The Soprano", "Sex and the City", " Game of Thrones " have become the most popular TV series in the American TV industry.
HBO's representative works "Game of Thrones"
Netflix rose
After cable TV, the emergence of satellite technology and broadband network technology has led satellite TV operators and telecom operators that use fiber optic networks to transmit signals into the TV service industry. AT&T, the largest telecom operator in the United States, entered the market at this time.
But what really led the reconstruction of the TV industry was the streaming media that appeared after the upgrade of the Internet.
In 2007, Netflix decided to invest $40 million to launch a streaming product "Watch Now" to permanently change its business.
Netflix was born in 1997 and is engaged in the rental business of "selecting videos online and mailing DVDs offline". Since 2003, Netflix has innovatively used the Cinematch sorting algorithm to provide users with personalized content and create "lists" of content that may be of interest or to rent, thus growing rapidly beyond traditional DVD rentals. As of 2006, Netflix has successfully attracted more than 6.3 million users and has earned more than $80 million in profits.
In the eyes of the outside world, it is not a wise move to introduce streaming products at this time in 2007. On the one hand, Netflix has been established for 10 years, went public in 2002, achieved profits in 2006, and annual revenue in 2007 reached US$1.2 billion. The business has been developing smoothly, and there is no need to change the track at all. On the other hand, streaming technology was not mature in 2007. Not only did it require a lot of capital investment, but the video quality of the final playback was much worse than that of DVDs.
But in fact, Netflix founder Reed Hastings has determined this direction since he founded the company: "In 1998, we named our company Netflix because we believe that Internet-based movie rental represents the future, first as a means of improving services and choices, and then as a means of delivering movies."
Netflix founder Reed Hastings
Reed Hastings believes that DVD rental is just an entry point rather than a long-term business. Soon the changes in the DVD market also confirmed this view: in 2007, the US DVD market had shrunk by 4.5%, which is the first time that sales of DVD, a medium, have declined year-on-year in more than ten years since its launch. After
jumped into the field of streaming, Netflix quickly expanded its online viewing services for TV programs and movie videos from computers to TV set-top boxes and smart TVs. Then in 2011, Netflix split streaming and DVD rental into two different subscription packages: Netflix is used for the streaming business, and DVD rental business is renamed Qwikster. The split of the two businesses of
means that if users want to use streaming media while renting physical DVDs, they must pay two subscription fees. As a result, the decision quickly stumbled into controversy, with analysts and media accusing this behavior of "a grab of cash." Although Hastings completely abandoned the plan less than a month after the announcement of Qwikster, Netflix has still suffered a certain blow, losing 800,000 users in the third quarter of 2011 and its share price fell 80%.
But if we put aside this twists and turns, Netflix's development over the years has increased from the initial 6 million to 23 million from the launch of Watch Now in 2007 to the end of 2011. As Reed Hastings said when apologizing for the business spin-off plan: "We carry out price improvement measures and business spin-offs, not to create more profits for the company, but to keep up with the pace of the times, because streaming will inevitably become the most important trend in the future." Under the guidance of Netflix, the streaming era has indeed arrived.
Although Netflix is developing rapidly, it still faces the problem that cable TV once faces: there is no original or exclusive content.
At this time, the six major media groups in North America not only control all mainstream public television networks, but also master content production companies and distribution channels.Content produced by these content production companies will be broadcast first on platforms with higher returns such as their own public TV stations or paid limited TV channels. The streaming media platform can only wait for the TV station to be broadcast for a period of time before it can be launched. If a streaming platform wants to broadcast it in advance, it will have to pay a higher copyright fee. In addition, when the TV station has sensed the threat brought by streaming, they will no longer be able to sell content to their competitors in the future.
In the entire content monetization chain, Netflix without original content can always stand at the bottom. It can buy content copyrights that may increase prices at any time, and may even not be able to buy content in the future. Therefore, in order to truly bypass the industrial chain monopolized by media groups, Netflix must produce its own content.
In 2013, Netflix defeated competitors such as HBO and AMC to win the copyright of " House of Cards ", directly investing US$100 million for the first two seasons, and does not require a pilot episode, and does not interfere with content creation.
adopts this unprecedented Straight-to-Series model because the data accumulated by the streaming media platform has given the answer. Before buying the copyright, Netflix had clearly known that the old British version of "House of Cards" was very popular on the platform, and most users who liked this series also liked the works of actor Kevin Spacey and director David Finch . So, Netflix brought together the themes, stories, directors and starring that users like.
As Netflix expected, House of Cards became the first online series to win the Emmy and Golden Globes, and brought 3 million new members to Netflix during its broadcast season, with revenue increasing by 18% year-on-year. Taking "House of Cards" as the template, Netflix has also generated a complete business model: spend a lot of money to produce high-quality content to attract users to pay for it. Users pay and their income increases. Continue to invest in content to increase user stickiness, gain more users, and earn more income.
Under this business model, Netflix's content spending has been rising year by year - spending $2 billion in 2013, rising to $8.9 billion in 2017, and reaching $15 billion in 2019.
This US$15 billion was not only invested in North America, but also in more than a dozen markets all over the world.
In 2016, Netflix, which launched its globalization strategy, was launched in 130 countries around the world, successfully transforming from an American company to a global media company. In order to attract users from different countries and with different cultural backgrounds, Netflix has begun to establish a localized team for content production in overseas markets. Content production is carried out by the local team, and Netflix only needs to provide funding, technology and distribution channels.
Because of its continuous expansion in content, Netflix has gained a wider range of users in the overseas market. In the fourth quarter of 2019, Netflix's global paid users reached 167 million, of which more than 100 million paid users came from the international market for the first time. Since the quarter, Netflix has transformed the statistical caliber of streaming revenue from local and international parts to four parts: the United States and Canada (UCAN), Europe, Middle East and Africa (EMEA), Latin America (LATAM), and Asia-Pacific (APAC).
According to the data disclosed in the second quarter of 2020 financial report, the United States and Canada are still the main sources of income, with revenue reaching US$2.84 billion, accounting for 46.66% of total streaming revenue, which has been showing a downward trend in the past year or more. From the perspective of year-on-year growth rate, the year-on-year growth of 13.6% in this quarter was lower than the revenue growth rate in the previous quarter, and also lower than the company's overall revenue growth rate in this quarter.
Europe, Middle East and Africa are the most important source of growth for Netflix except North America, with revenue in Asia-Pacific increasing by 63.0% year-on-year. overseas market has become the main source of growth in performance, meaning that Netflix's domestic business in the United States has begun to become less easy to do.
The methodology learned through "House of Cards" seems to have problems.
analyzes the reasons behind it, and uses high investment to exchange user growth strategy. After the original accumulation period of users, the corresponding user growth for every penny spent is slowing down and the marginal benefits are decreasing.More importantly, media groups that control all mainstream public television networks, telecom operators that buy media groups and more Internet companies have all entered the streaming media field.
Netflix's strong competitors have appeared one after another.
Streaming Fight
After Netflix's first streaming platform subscription-based on-demand (SVOD) model and quickly gained user growth, former rivals and emerging forces have also launched their own streaming platforms one after another.
's former old rival, namely several major media groups that control the American film and television entertainment market, such as Comcast, Disney, Columbia (CBS), and Time Warner . They not only launch their own streaming media, but also work together in multiple companies. In addition, during the development of streaming media, several major media groups in the United States are still undergoing mergers and acquisitions, so the ownership of several streaming media platforms has also changed, and they were eventually taken down by the strongest one by one.
Among these old rivals, Netflix's main opponents are Disney and HBO Max.
- Disney
Netflix's number one rival is Disney. Currently, Disney, which includes all copyrights of Fox, Marvel, Pixar and Lucas, is trying to build a home digital TV + streaming matrix with three major streaming platforms: Hulu, ESPN+ and Disney+.
Hulu
Hulu is a streaming media platform officially opened to users across the United States in 2008. It used to be the owners behind it were NBC Universal, 21st Century Fox, Disney and Time Warner. The first three each enjoy 30% of the shares, and Time Warner owns 10%. Under this capital landscape, Hulu has become a gathering place for all high-quality content of four media companies, with very obvious advantages. For example, "The Handmaid's Story" defeated Netflix in 2017 and won the Emmy Award.
Since 2011, Comcast has become the owner of NBC Universal. In 2018, the US telecom giant AT&T acquired Time Warner for US$85.4 billion, Disney acquired Fox for US$71.3 billion in March 2019, and AT&T sold its shares in Hulu in April. After several changes, Disney has become the largest shareholder with 60% of Hulu's equity.
Hulu's complex background determines that it will take on multiple types of users from cable TV to streaming, and its model is also composed of multiple packages that are layered in advertising subscriptions and price. Especially in order to attack Netflix, which was the first to raise prices, Hulu lowered the price of advertising packages from $7.99/month to $5.99/month in early 2019. As of the first quarter of 2019, Hulu's user base was close to half of Netflix.
ESPN+
ESPN+ is a paid streaming media platform launched by ESPN.
ESPN is a cable TV with a history of 40 years and professional sports programs. Due to the slowdown in the growth rate of membership fees and advertising revenue in recent years, Silicon Valley giants such as Facebook and Twitter and traditional TV operators are competing for sports copyrights. In April 2018, ESPN officially entered the streaming media. The usage portal of
ESPN+ is embedded in the ESPN App, so its positioning in the streaming media platform is a "additional service". Users need to pay a monthly fee of US$4.99 per month, and the threshold is not high.
ESPN+ is mutually beneficial and complementary to ESPN in terms of content. Its main content is sports events outside the mainstream competitions broadcast by ESPN, and its management also made it clear that ESPN+ aims to attract fans of niche projects and sports enthusiasts who want to know everything. After ESPN+ was launched, Disney is also purchasing local sports TV networks in large quantities, with the goal of providing ESPN+ with more live event content.
ESPN+, which takes the content differentiated route, has achieved outstanding results since its launch. In the past five months since its establishment, its number of users has exceeded one million. According to SportPro, as of November 2019, ESPN+ subscription users had exceeded 3.5 million.
Disney+
is Disney+, which was launched at the end of 2019. According to official Disney data, Disney+ attracted more than 10 million users on the day it was launched, and the Sensor Tower report also showed that in the fourth quarter of 2019, Disney+ was the most downloaded application in the United States. In addition, according to a report released by Google , Disney+ is also a hot search keyword in the United States in 2019.The reason why
Disney+ has attracted much attention is first of all, Disney's strong content advantages. After more than 90 years of continuous acquisitions, Disney has numerous IP and content copyrights. Thanks to this, Disney+ has 7,500 episodes of drama content after it was launched, more than 120 recent movies and more than 500 stock movies. In addition, Disney plans to develop and produce new original content specifically for Disney+.
Secondly, Disney+'s low price and bundled packages are also important reasons for attracting users. Disney+ is priced at $6.99 per month, which is obviously more attractive than Netflix's cheapest $8.99 per month. In addition, Disney has also launched a bundled package, where users can get three major platform services at the same time at a price of $12.99 per month. This package includes a variety of content such as episodes, movies, sports events, etc., and the pricing is the same as the price of Netflix's most popular package.
According to the latest quarterly financial report data, as of the fourth quarter of 2019, Disney+'s subscription paid users reached 26.5 million, which is very close to the 27.2 million subscription paid users (SVOD) of Hulu, which has been online for more than a decade.
- HBO Max
In addition to Disney, Netflix will also usher in its second rival, HBO Max in May this year.
HBO Max's biggest advantage is its content. According to the official trailer, HBO Max will have nearly 10,000 hours of high-quality content from HBO, Warner Bros., New Line Movies, DC Entertainment, CNN, TNT, TBS, truTV, CW and other companies, such as the classic American dramas "Friends", "Big Bang", "Rick and Morty", "Game of Thrones", etc.
In addition, like Netflix, HBO Max will also have original movies that are only available on streaming platforms. To this end, Warner Media has specially established a new film division, Warner Max, to produce exclusive movies for HBO Max. According to foreign media reports, WarnerMax's budget for making movies will be between 30 million and 60 million US dollars, and it is expected to produce 8 to 10 works each year.
Warner aims to build HBO Max into a highly competitive streaming platform in original content. Of course, behind this is a massive amount of capital investment. As the owner of Warner Media, AT&T, the largest telecom company in the United States, said it has set aside $2 billion for HBO Max in 2020 and will continue to invest in the future.
In AT&T's plan, HBO Max will also be deployed in overseas markets like Netflix. According to Warner, HBO Max will be the first to enter Latin America and Europe, which operates HBO TV networks, and HBOs in other regions will adopt different methods and strategies through authorization from their partners. AT&T has set clear goals for HBO Max to gain 75 million to 90 million users by 2025, and 25 million to 40 million users from Latin America and Europe.
In addition to the old media groups, there are also emerging forces from Internet companies and technology companies entering the streaming field. Among them, the players worth paying attention to are Apple TV+ and Amazon prime video.
- Apple TV+
In the field of streaming media, Apple is completely a newcomer. It does not have the rich content reserves of several major media groups and the ability to control the film and television industry chain, and it does not have an advantage in terms of entry time. Therefore, Apple TV+'s settings in content, price and other aspects are not completely benchmarked against Netflix, but are trying to bypass the dispute between several major mainstream streaming platforms with multiple strategies.
Apple first implemented a strategy of relying on hardware to promote software - as long as you purchase any of Apple hardware, you will receive a one-year Apple TV+ subscription service. Currently, the number of activated Apple hardware devices exceeds 1.4 billion. Such a huge user base means that Apple TV+ will soon gain over 100 million users when given free of charge. Compared to Netflix and Hulu, which have worked hard for more than ten years, it is much easier for Apple TV+ to accumulate original users.
At the same time, the low-price strategy is Apple's second "trick". Currently, the subscription prices of mainstream North American platforms are above $10, while the price given by Apple TV+ is an extremely low $4.99/month. For North American users who are already accustomed to subscribing to multiple streaming services, Apple TV+'s far below psychological expectations may help it become a complement to mainstream platforms.
Of course, if you want to obtain a higher retention rate, the streaming media platform must retain users with content.Apple has announced that it will invest $1 billion in original content. Although Apple's trailer has added big names such as director Steven Spielberg , actor Edward Burns , talk show queen Oprah Winfrey, Apple does not have an advantage in both content investment and content library reserves.
- Amazon Prime Video
Unlike other streaming platforms, Amazon Prime Video subscriptions are included in the Prime membership subscription service provided by Amazon e-commerce platform. Prime's business initially included unlimited free package express delivery services, followed by streaming video, streaming music, and Kindle library services. Compared with several other streaming platforms, Amazon Prime Video is more similar to Apple's Apple TV+, and its positioning is an integral part of the content service ecosystem.
From the perspective of pricing, Amazon Prime Video's advantage lies in its bundling with multiple offers related to other Prime membership services. The $119-year Amazon Prime membership can not only allow users to watch video content without ads, but also obtain multiple discount benefits such as music and shopping. The price of $119 is comparable to Netflix's lowest subscription price, and among a number of streaming platforms, Amazon Prime Video also has a certain price advantage.
Amazon Prime Video's disadvantage is also content. Although Prime Video has 12,000 movies, which even exceeds Netflix and Hulu, most of the movies are old Hollywood movies and have no advantage over Netflix's videos that are both pioneering and big scenes.
To make up for this disadvantage, Amazon has paid more attention to developing original content in recent years, and its content budget in 2019 has reached US$6 billion. Meanwhile, Amazon spent $250 million to buy the global copyright of "Lord of the Rings" in 2017 to prepare a series. The drama started filming in September 2019. In order to ensure super special effects, Amazon is preparing to invest more than $1 billion in production costs. The head of Amazon Studios' film and television department said that he hopes this series can become a super project.
Conclusion
Even if this business that requires extra money is not easy to do, the media groups with a century-old history, Internet companies and technology companies that do other businesses have all squeezed into the same track. For the former, the move towards streaming is because the original business is about to be "revolutionized" by new technologies, while for the latter, it also wants to find the second curve before the original business stagnates and get a piece of cake during the heyday of streaming.
Netflix has opened a new stage of content competition in North America through "House of Cards". Now, Disney, which is equally strong, has a decision to "surf the Internet" in "Mulan", may also bring greater changes to the industry.
On the same track, the starters have already received pressure to grow, and new entrants have joined with confidence. The "Game of Thrones" between streaming platforms has just begun.
