How Netflix won the streaming war

When Netflix presented its data for the last quarter of 2023 on January 23, several financial analysis companies, such as Morgan Stanley and Bernstein, declared: the streaming wars have a winner. In the last three months of the year, the company added 13 million new subscribers worldwide, its second-best quarterly figure ever (only behind its numbers from the Covid-19 pandemic). In all of 2023, it added more than 29 million new subscribers. The total figure now amounts to 260.28 million. Its revenue grew by 12% year-on-year. It is the streaming company with the lowest percentage of cancellations compared to its subscriptions: barely 2% in the United States, well below its competitors, which are at an average of 5.3%, according to data from Antenna, a company that tracks subscription services, published in Business Insider.

Last year, the streaming wars entered a new phase. After a 2022 in which Netflix’s first drop in subscribers made the platforms smell danger, in 2023 Wall Street began to pay attention to whether these services’ accounts were healthy and they were profitable businesses. It is in this new situation that Netflix emerged as the great winner. Several factors led the experts to bestow such a title on the company: first, it is the platform that sets the pace in online television. It was the first major streaming service to take its ad-supported subscription plan global, and by the beginning of the year it already had approximately 23 million monthly active users. It is expected that the elimination of the basic plan without ads and the other platforms’ price increases will convince more and more customers to choose to pay less in exchange for watching a few minutes of advertising. This has become a widespread business model that most platforms have implemented by now. They were also the first to take active measures against shared accounts outside the user’s home, an unpopular step, but one that has ended up bearing fruit. Others, such as Disney+, have also followed suit on this matter.

According to data from the consulting firm Nielsen, which measures television audiences in the United States, Americans devote more than twice as much time to Netflix than to its closest competitor. Of the total time that Americans spent watching television in December 2023, 7.7% was on Netflix, compared to 3.3% for Prime Video or 1.9% for Disney+ (YouTube surpasses them with 8.5%). One more point for Netflix.

Content licenses

Beyond the numbers, there is another factor that signals Netflix’s dominance over other on-demand television services. Series like Six Feet Under, Band of Brothers or, starting in April, Sex in the City, some of the titles that helped establish HBO as a leading name in the field, can also be found on Netflix. The “ta-dum” company also signed an agreement with Disney by which 14 of the latter’s series, among them Lost, This Is Us and How I Met Your Mother, can also be seen on Netflix in the United States. And Yellowstone, a popular Paramount title, reached some countries outside the U.S. thanks to Netflix. The agreements with Warner and Disney are not about exclusivity, so their own digital services will keep those titles, too.

Behind this phenomenon is a change in mindset regarding the exclusivity of content that could be seen as a return to the beginnings. Netflix first became strong thanks to licensed content. The business benefited both Netflix (which was becoming established thanks to titles that had been previously produced and broadcast by third parties) and the studios (which took advantage of this to make up for the drop in DVD sales and bring their titles to more viewers). After a while, those companies realized that their content was feeding a monster that would end up swallowing them whole. When they created their own video-on-demand services, they ended those licenses to highlight the exclusivity. When in 2017 Disney wanted to make it clear that its commitment to streaming was serious, it publicly broke with Netflix. Disney CEO Bob Iger even compared licensing their content to “selling nuclear weapons technology to a Third World country, and now they’re using it against us.”

In 2023, a new change in mindset came about when companies like Warner Bros, Discovery and Disney realized that exclusivity had become a burden that prevented them from profiting from products that were no longer doing well on their own platforms. With these agreements, in principle, everyone wins: sellers can obtain an economic benefit that helps them hold back the debts that, in some cases, only keep growing, and buyers can be more efficient in their spending and get more new content at a time, after the Hollywood strikes, in which the slowdown has been evident. According to data from What’s On Netflix, a site focused on the platform’s content, Netflix released about 130 fewer original shows in 2023 than in 2022; a drop of 16%.

At Netflix, they are aware of the good returns that this shift in the industry brings them. Ted Sarandos, one of the company’s CEOs, took advantage of the latest results presentation to encourage companies to continue licensing content to them. “We’ve got a rich history of helping break some of TV’s biggest hits, like Breaking Bad and The Walking Dead. Even more recently with Schitt’s Creek. We can resurrect a show like Suits and turn it into a big pop culture moment,” he said, adding: “I am thrilled that the studios are more open to licensing again, and I’m also thrilled to tell them [that we] are open for business.”

Although these agreements are beneficial for both parties, some experts are urging sellers to be cautious, for they could be, once again, feeding a monster that in a few months might begin to benefit greatly from other people’s content if its plan with ads succeeds. Jason Bazinet, a media analyst quoted in Business Insider, describes it like this: “Netflix is making money; everyone else is losing money. Netflix will not license out its originals to anyone else, but all the other Hollywood studios are licensing out their content to Netflix.”

The prospects of their competitors

Not everyone agrees on declaring a winner in the streaming wars yet. And, even if Netflix is indeed the victor, the trickiest part still lies ahead: maintaining leadership. Prime Video and Disney are the rivals best placed to put up a fight. Experts like Bloomberg’s Lucas Shaw point to sports or children’s programming as Netflix’s weaknesses, which its competitors can exploit. Disney is well-placed in these areas, with years of advantage, according to the analysts, who also emphasize the revolution that incorporating advertising into Prime Video in the United States, Canada, the United Kingdom and Germany has brought to the internet TV business: including advertising by default to all its subscribers and offering the option to pay an extra $3 per month to not see ads.

Another pending matter for Netflix is live event broadcasting, and some of its upcoming major bets are aimed in that direction. On Saturday, February 24, Netflix streamed the SAG Awards gala, the first of its kind on the platform. On Sunday, March 3, it will stream live an exhibition match between Rafael Nadal and Carlos Alcaraz. And starting in 2025, the platform will be the home of World Wrestling Entertainment’s flagship show, Raw, which will translate into 52 weeks of live programming in the U.S. and the U.K. Because they may have won the streaming war, but there are still battles to fight.

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