Netflix Won the Streaming Wars
Flashy Pixels Issue 12: How Netflix’s gourmet cheeseburger approach to entertainment turned it into an unstoppable streaming powerhouse
People in the entertainment and technology industry love to talk about the streaming wars, a term coined to identify when Hollywood studios pulled all their content off rival streaming services to offer them exclusively on their streaming platform. The business case was to cut out the intermediary and establish a direct connection with the consumer, enabling more effective monetization of their assets and keeping the user in their ecosystem. Throughout a six-year run, from 2018 to 2023, streaming services spent billions on programming to lure new subscribers.
In 2021 alone, Netflix's programming budget reached a staggering $17.5 billion, roughly equivalent to the combined annual revenue of Uber and Starbucks. An avalanche of new commercial-free, on-demand entertainment flooded the market, all vying for our attention. The ease of password sharing turned many users into digital Robin Hoods, distributing streaming access far and wide. It was a circus of excess, with consumers as the ultimate winners.
The streaming wars reached a turning point last year, with competitors conceding defeat in their struggle to keep pace with Netflix's success. In their relentless pursuit to outpace the streaming giant, these competitors poured astronomical investments into original programming, ultimately eroding their overall profitability. Despite that investment, Netflix still had seven of the top ten streaming programs of 2023.
Now, most streaming platforms have implemented an ad tier, many are cracking down on password sharing, and most studios have reentered the licensing business to allow Netflix and other streamers access to their content, which is why you can now watch HBO Originals like Six Feet Under, Sex and the City, and Insecure on Netflix. Warner Bros. Discovery, HBO’s parent company, decided if they couldn’t get people to watch the programs on their streaming service, they were better off reaping the profit of licensing the content to Netflix. Ted Sarandos, the Netflix CEO, said on their first quarter 2024 earnings call, “I am thrilled that the studios are more open to licensing again, and I am thrilled to tell them we are open for business.”
Netflix began as an online DVD rental service in 1997. According to the company's founder, Reed Hastings, he conceived the idea after Blockbuster charged a forty-five dollar late fee for returning the movie Apollo 13 past its due date. When reporters couldn’t verify the story, he admitted it was only an “emotionally true” origin story. In 2007, they introduced a streaming “watch now” option to the DVD rental page, eventually becoming the service we know today.
Netflix's success in the streaming wars can be attributed to what Bela Bajaria, the company's chief content officer, calls the gourmet cheeseburger approach. In a January 2023 New Yorker profile by Rachel Syme, Bajaria explains that she seeks content that is "premium and commercial at the same time." This gourmet cheeseburger strategy focuses on delivering high-quality yet widely appealing shows and movies.
The hit series Bridgerton epitomizes this gourmet cheeseburger approach. On the surface, Bridgerton appears to be a lavish period piece with the production values one would expect from a critically acclaimed drama. Yet, it unfolds with the addictive storytelling and binge-able pleasure of a primetime soap opera, a genre in which Bridgerton's creator, Shonda Rhimes, has extensive experience from her years at ABC. This blend of high-brow aesthetics and crowd-pleasing narratives has positioned Netflix as a streaming powerhouse.
And it’s not exclusive to Netflix’s original programming. One of 2023’s most streamed shows was Suits, a drama that premiered on the USA network as part of its “blue sky era” programming defined by escapist dramas with quirky characters. However, since going off the air, it lived on Peacock's streaming service with little fanfare before they agreed to license it to Netflix, where it exploded in popularity. Taking advantage of the renewed popularity of Suits after its success on Netflix, NBC Universal has green-lit a spin-off series called Suits L.A.
Entertainment industry reporter Matthew Belloni says, “There’s a sense around Hollywood that Netflix can make something a hit more than any other service. It’s not even close.” Given the service's reach, Netflix is often the first to see new development deals seeking a streaming home. Content creators understand that their best opportunity to reach a large audience and become part of the cultural conversation is on Netflix. This advantage means other streaming services must pay a premium to convince creators to sign with them.
Netflix’s next frontier is live sports, including two Christmas day NFL games. By stepping into the live sports arena, Netflix signals that their streaming wars victory was only the beginning of their reign.
Best yet!