Many observers have commented on the similarity between streaming services today and cable and satellite television in the 1980s. Both offered viewers increased choice. Both were initially free from advertisements. Both eventually introduced advertisements as a way of keeping costs down, recognising that their customers likely had more than one streaming service – or pay-TV station.
There are many differences between the two as well. Apart from the obvious – cable-TV offering linear programming and streaming being on-demand – the business models of the 1980s’ entertainment providers and those of today stand in sharp contrast. Below is an overview of the two “media wars”, with satellite TV in Britain as a case study for the 1980s. The outcome offers some hints for how the current streaming war may end.
While satellites have been used by TV stations for sharing live events across continents since the 1960s, it was only by the 1980s that Direct-to-Home (DTH) broadcasts became technically and commercially viable in US and Europe. Each European country was allocated a limited number of channels. In Britain, which had been allocated five, the government granted broadcasting licences to the BBC and a consortium of commercial interests. Since the satellite had to be built from scratch, by a British company, the costs proved prohibitive and the BBC was unable to participate. Commercial company British Satellite Broadcasting (BSB) was eventually awarded a franchise to carry four stations in 1986 but technical delays meant that broadcasts were not launched until 1990. By then, a competitor had already cornered the market place. Australian press magnate Rupert Murdoch’s SKY used an already existing satellite, with cheaper broadcasting technology (and receivers) and targeted all of Western Europe rather than just Britain – a significantly larger customer base. With none of the companies being profitable, possibilities of a merger were explored – and in November 1990 both companies became British Sky Broadcasting, which still exists today alongside Sky in Italy, Germany and further afield.
Other countries saw different outcomes, with some never experiencing any notable competition between providers and others – the Nordic countries for example – still having separate providers with different stations well into the 2000s.
On-demand streaming disrupted everyone in the business of traditional broadcasting and the now-obsolete video rental market. Initially, Netflix offered DVDs for rental via mail order but it was the launch of its streaming service in 2007 that would take the company to its current heights. When the company began developing original content – rather than purchasing rights to existing films and series – it posed a formidable threat to television. Instead of releasing new episodes one-by-one, the company pioneered the practice of launching whole seasons at once.
While popular with consumers, Netflix’ business model has left the company open to criticism from more cautious investors as it until two years ago was entirely dependent on subscription revenue. Since November 2022, the company’s entry-level package includes advertisements – a new source of revenue for the firm. Prior to the Covid-19 pandemic, when demand for in-home entertainment like streaming rocketed, Netflix had a relatively low revenue for a mega-cap firm and low profit margins too.
While the initial competition was with TV networks, the main rivals for Netflix nowadays are other streaming services – such as Amazon Prime Video, Disney+ and Paramount. Disney’s streaming service was the butt end of many jokes when it first launched (“who wants to watch old children’s films?”) but within three months of launching, over 26 million users had signed up – thanks to new produced content aimed at others than just children. Disney+ has however struggled to be profitable. Like the other services, Amazon Prime Video offers a mix of new and old content but the service’s exact financial health remains unknown, since Amazon does not account for the streaming service separately from its other Prime operations.
One analyst believes that Amazon spends half of its Prime revenue of Prime video content – and provides reasonably convincing evidence to back this up. Though it can be questioned if this is money well spent, fact remains that Prime is profitable (provided the assumed figures are correct). With Amazon having several other branches of its business, they are also better placed to see their streaming service suffer losses than a company like Netflix. Indeed, as has been suggested by The Economist, Amazon may well be using its streaming service as a way of drumming up business on its online retail platform. On many shows, viewers are presented with links that allow them to purchase whatever is on the screen when they press “pause”.
The highly different characteristics of Netflix, Amazon and Disney and their respective platforms makes the current streaming war a very different matter compared with the cable TV and satellite wars of the 1980s and 90s. Several different outcomes are possible. A merger – as happened with Sky and BSB – may well become an option if consumers continue to leave and prices increase. But, a merger of all streaming providers is extremely unlikely – not least since many, if not most, have parent companies active in other areas. Netflix, with no other business operations that streaming (and gaming), is in fact a notable exception. That two or more streamers merge, could however happen. There has been speculation that Apple (with its streaming service Apple TV+) may buy Disney.
Realistically, it seems more likely that it ends up being Netflix that is acquired, since it is the only main streaming service that has no other major activities, like Disney with its amusement parks and franchises and Amazon with its web storage business and retail platform. For now, Netflix is profitable and would likely be too expensive to be snapped up by Amazon or Apple. But that might change if revenue and profits fall across all streaming services. Then, a company like Apple or Amazon with other business units to make up for streaming losses, would probably be in a good position to buy one or more of their rivals.