YouTube & Netflix Vs. The Field

The business of streaming has been on a rollercoaster in the last two years that isn’t much less treacherous than that of the linear TV business, from the ongoing losses at NBCUniversal’s Peacock to Warner Bros. Discovery’s
WBD
abandonment of both CNN+ and the HBO streaming brand to the invasion of Netflix
NFLX
into the ad market. And let’s not get started about the writers’ strike and macroeconomic uncertainties.

So, what can we be certain of now? Unless we’re talking about live sports – and even that foundational rock is loosening – the latest viewership stats only reconfirm that streaming is where and how consumers want to watch TV.

This is no Covid story – streaming’s momentum continues unabated

While there are more than enough complaints about Nielsen ratings, there is no controversy about the fact that the streaming growth that exploded in the early stages of Covid has continued unabated. In its latest monthly report of what it calls The Gauge, Nielsen reported that streaming now comprises 36.4% of all TV viewership, followed by cable with 31.1% and broadcasting with 22.8%. Virtual MVPD viewing such as Fubo and Sling TV are excluded from this analysis.

The biggest shift from just last fall is that streaming’s share has grown nearly 16% from just last September. And while broadcasting and cable benefitted from college and pro football last fall, cable’s basketball and hockey playoffs and the start to the baseball season didn’t do anything to halt the downward slide of linear TV’s share of viewing. And even the gross amount of linear TV viewing fell by over 5% for both broadcasting and cable. Just more confirmation of the challenges in that world.

Streaming isn’t a wild scrum – YouTube and Netflix stand far above the crowd

If you surf the streaming apps available on Smart TVs or Connected TV devices (does anyone actually do that?), it feels overwhelming and incomprehensible, with over 10,000 options in the market. But the reality is that even among the now “established” streaming platforms, YouTube and Netflix are dominant. YouTube accounted for 8.5% of total TV viewing in May, while Netflix was a close second at 7.9%. Hulu and Prime Video came in at less than half of these percentages. Of the “name brand” major media company streaming services, none hit 2% of TV viewership and HBO Max (RIP) and Peacock trailed the FAST service (“free ad-supported TV”) Tubi. Paramount+ didn’t even rise to this level, living in the dreaded “Other” category from Nielsen.

The streaming hierarchy seems likely be more entrenched than the oligopoly that dominated decades of the TV broadcasting world. In that case, the networks at least tended to traded spots based on driving a few hit shows. It is a far bigger hill to climb today for the major media company streaming platforms. And the economics of both the linear and streaming worlds will likely reinforce this further, as evidenced by WBD’s reported shift to again licensing of many of its high-profile HBO properties to Netflix rather than keeping them exclusively on Max. These direct-to-consumer offerings may be faced with a future that looks like the world of TV Everywhere – remember that initiative? I didn’t think so. These services certainly will have a place in the TV ecosystem, but much of the exposure and monetization of studio content will still need to come from multi-platform staging and syndication, with the biggest “first-run” streaming audiences on the market leaders.

FAST services have insinuated themselves into the core streaming ad business

Speaking of Tubi, The Gauge report has expanded its tracking of individual FAST services to include the Roku Channel along with Tubi and PlutoTV. With a tiny fraction of the content spending of a Peacock, Disney+ or Paramount+, these services are nonetheless establishing a foothold in viewership as well as in advertising. These services haven’t relied on original production or hits to drive volume, but on massive content libraries that often require minimal to no direct licensing fees. Simply put, 1% of TV viewing share for Tubi or Pluto TV is a lot cheaper to come by than the same 1% for Disney+ or Peacock. But even as these FAST platforms have become more established, further challenges await. WBD is planning on entering this arena with its own FAST service, so will WBD’s deep content library still be licensed elsewhere on the FAST market? Rolling up the vast array of independent AVOD and FAST services would seem to make economic sense, but the financial markets remain skeptical about one of the roll-up leaders, Chicken Soup for the Soul Entertainment. Consumers have clearly spoken – they like FAST services. But how much this business will help offset the linear TV declines remains to be seen.

Expect media company original production and library licensing to face rockier times

For the streaming market leader Netflix, original programming comprised only 4% of its U.S. content offerings in 2016. By 2018 this leaped to 11%, growing to over 50% by summer 2022 and is projected to be 75% by year end 2024. Putting aside the short-term squeeze coming from the Writers Guild of America strike (and the potential to be joined by SAG-AFTRA), Netflix’s growing focus on original programming will not only keep the pressure on original content competitors, but may also make it tougher for subsequent library licensing deals as the Netflix non-original space shrinks. All of this suggests the continuing (never-ending?) attraction of optimizing the mix of both subscriber and advertiser dollars – it takes a revenue village to succeed no matter how many viewers are watching.