The Streaming Wars Phase 2: There Will Be Blood?

Honestly, this was supposed to be a Linkedin post, however I exceeded the maximum character limit, so here we go.

Up until now, device manufacturers have only had really one major direct-to-consumer streaming service to deal with. Obviously, I’m talking about Netflix.

I’m not forgetting about you, Prime Video or Hulu, but hear me out.

Phase One of The Streaming Wars is currently taking place and there’s going to be hella lots of activity over the next 9 months with direct-to-consumer launches from Apple, Disney, NBCUniversal, WarnerMedia, and Quibi.

This phase has been very well covered in the media, but if you’d like get your Streaming Wars fix, you can check out the video I did with CNBC.

There Will Be Frenemies

What’s not being covered is the fact that virtually all subscription OTT service providers are required by platform operators (Roku, Apple, Amazon, etc) to allow new subscriptions to be captured directly within a company’s OTT application.

And this is a bad thing, Kirby?

Well not exactly. I’ve faced this question over and over and and the answer really comes down to who’s asking me the question and their current situation…a-hem leverage.

From a OTT service provider’s view, supporting in-app billing is great because you can capture an immediate, sometimes impulse purchase at the very moment the customer’s ready to buy.

But the rub is that for new customers that sign up to your service via in-app billing, you’ll be giving away 15-30% of your revenue to the platform operator in perpetuity.

For example: If I sign up for a new HBO account via the HBO Now app on an iPhone, iPad, or Apple TV, my payment will be processed via Apple’s iTunes Billing and HBO and Apple will split that revenue (in perpetuity) based on the terms they’ve agreed to.

Most likely, you’ll acquire more subscribers by supporting in-app billing as you’re reducing the amount of steps required to convert a user. Sometimes platforms operators will even co-market your service, and it makes sense why. If Apple’s collecting 30% of new HBO Now subscribers via Apple TV or mobile devices, why wouldn’t they help market that service to their customer base?

Sometimes this tradeoff is worth it. Sometimes it’s not.

For Netflix, it’s not.

There Will Be (More) Giants

Last December Netflix chucked deuces to Apple and pulled out of the iTunes program. Apple allegedly earned about $256 million from the Netflix app in 2018, so I’m sure that had to sting a bit.

But Apple had two options

Option 1.) Concede to Reed

Option 2.) Kick Netflix off its platform

In case you don’t know how Apple responded, I want you to know I streamed Netflix’s “Mindhunter” on Apple TV last night. You should check it out.

And this brings us to Phase 2 of The Streaming Wars which will be how each of the new Streaming War combatants respond to the tariffs imposed by platform operators.

No Taxation without Representation

Disney’s already making its own plans to bypass the “subscription platform tax” by bundling Disney+ with Hulu (with ads) and ESPN+.

Apple TV+ will join Disney+ in November. And HBO Max, Peacock, and Quibi drop in April 2020.

These service need Roku, Apple TV, and Amazon Fire TV. And those platforms need these services.

But who’s got the leverage and who’s willing to make Netflix-like power moves? Essentially, this is carriage agreements 2.0.

Think about the backlash if Apple pulled Netflix from Apple TV and mobile devices earlier this year.

And just imagine if Disney+ wasn’t available on Amazon devices on November 12th.

It’s only the beginning of the American Revolutionary Streaming War. And it’s not only subscription services that are being taxed. Ad-supported streamers are asked to share a % of their ad revenue or ad impressions.

There will be leverage. There will be disputes. But will there be blood?


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