Netflix and the Economy of Stream Services

Netflix is a household name, but with competitors, like Disney, joining the streaming ecosystem, what should consumers expect from Netflix? Keep reading to find out.

Netflix is a pop culture staple. We can barely go a day without letting the word escape from our lips. It's become so commonplace that the brand has earned a spot among the most recognizable, with other household staples like Coke, Kleenex, and Q-Tip. I mean, who ever asks for a cotton swab? That said, in this wild west age of technology the competition is cutthroat, and Netflix is gearing up for some sweeping industry changes that may impact its bottom line in unprecedented ways.

If you've looked at the news, you may have guessed we're talking about a loss of licensing for Netflix. Granted, Netflix has plenty of unlicensed content in the form Netflix Originals like recent hits Umbrella Academy, Bird Box, and Sabrina the Teenage Witch, but is that enough to sustain the streaming giant if its hard-hitting licensed shows get pulled?

If you've read this far, you're probably wondering, how exactly will pulled licenses impact Netflix? Sure, Netflix has some stellar originals. Since it's first original release in 2013, House of Cards, a political satire about a fictional President and his disgraced climb to fame, the company has been in the business of taking risks. Mostly, they've paid off. House of Cards lasted six seasons, with the final eight-episode season trailing off with a dull pop. Since then, however, it's seen successes with a creative array of movies, shows, and docu-series including Making a Murderer, Narcos, and Tidying Up with Marie Kondo to name a few.

With all that said, Netflix appears to be an impenetrable giant in a sea of micro-streaming services, but just over a year ago another player announced they were throwing their hat in the ring. It changed everything. In 2017, Disney said it was working on a new streaming product that will be made available to consumers. Since then it has been given a name, Disney+, and a release that's projected for sometime this year.

In addition to announcing that it would be competing against Netflix, Netflix and Disney failed to strike an agreement that would allow Netflix to retain licensing of their Marvel originals. In short, Netflix canceled them all. It's speculated that Marvel, now owned by Disney, could continue production of beloved shows like Jessica Jones, Punisher, and Daredevil. Whether or not these shows continue, it's known that a version of the Marvel Universe will exist on Disney+, and as direct competitors, Netflix doesn't want to give them any free advertising by continuing to run the shows they had previously licensed. It's also expected that Disney will pull all of its content from Netflix prior to the launch, according toForbes, so watch Moana again now if you don't plan to subscribe to Disney+.

Disney may be the largest competitor to emerge in a market that's already saturated by smaller networks that offer stream services, but we shouldn't expect them to be the last. As more companies look to Disney to gauge the success of piloting a new streaming platform, other networks may look to end relationships with Netflix and reserve the right to share their content only on a proprietary pay-for-play platform. We've already seen a similar model of entertainment gatekeeping happening with DC Universe, the stream service that makes up the exclusive home of shows like Titans and Doom Patrol.

For Netflix, loss of licensed content could be hugely impactful. Today, the universal Netflix audience is indulging 37% of their time in original content, and the rest is spent with classic favorites like The Office, Friends, and other licensed content from network television, some of which are scheduled to vanish from the streaming giant's lineup over a matter of time as more companies step up to compete.

This is no surprise to Netflix executives, of course, who want to calm concerns of investors. Netflix chief content officer, Ted Sarandos, told Forbes:

Our early investment in doing original content more than six years ago was betting that… there would come a day when the studios and networks may opt not to license us content in favor of maybe creating their own services.

Despite the high quality of content and variety of programs offered by Netflix Originals, it remains to be seen if the progress made over the last six years has been enough. In fact, the above mentioned statistics suggest Netflix still has a ways to go if it is going to be able to withstand the transition fully intact. While the streaming conglomerate braces for impact, consumers might want to emotionally prepare themselves for some changes as well. It stands to reason that more stream services to choose from means higher chances that you'll end up shelling out more money if you want to watch your favorite shows.

In 2019, Netflix has already raised prices, offsetting things like production costs of original content. With the eventuality that more services will pop up and become household staples, consumers should prepare to open their wallets more frequently. That could mean making changes to your home entertainment budget or being more discerning about which content is most important to you.

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