You’ve probably heard of the streaming wars — the battles between companies like Netflix and Disney vying for video supremacy.
But even though Disney announced on August 10 that it had has overtaken Netflix in the race for global subscribers, it’s hard to say exactly who “wins”. Companies are notoriously secretive about their internal metrics, and while they’re clear about how they measure users in their financial records, company to company is more like comparing apples to oranges. … have a cat.
The result is a multi-billion dollar horse race with no common denominator or finish line, making it nearly impossible to tell who wins.
“Nobody knows, and it’s no accident,” said Michael Smith, professor of information technology and marketing at Carnegie Mellon University.
A numbers game
Figures released by companies are difficult to analyze, in part because companies present their subscription and viewership numbers in the way that is most favorable to them.
Disney, for example, counts a subscription to its streaming plan — which includes Disney+, Hulu, and ESPN+ — as three separate subscriptions. In a more transparent world, Disney would share unduplicated household numbers, making it clear how many of its users have opted into the package and making it easier to compare with Netflix and other streaming services. But this is not the case. And two other major players, Amazon Prime Video and Apple TV+, do not publish any figures.
“Disney counts three times,” said Geetha Ranganathan, media analyst at Bloomberg Intelligence. “That’s what most other services do too [outside of Netflix]. So wherever they have a bundled product – say you have subscriptions to Showtime and Paramount+ bundled – they count that as two subscriptions, even though technically it should only be one.
And that’s not just a problem from one streaming company to another, but also when it comes to comparing the industry to cable TV at large.
According to Nielsen, the largest TV ratings tracker, steam has overtaken cable tv for the first time in July. Streaming engulfed 34.8% of total television consumption, while cable fell slightly at 34.4%.
But that analysis didn’t count all the means and devices people use to stream content, said Dan Rayburn, streaming and media analyst.
“No one stops to question Nielsen’s methodology because if you look in the fine print, they don’t track any streaming on tablets or phones,” Rayburn said. “So streaming already overtook cable in terms of total hours watched, years ago.”
Rayburn also argued that the numbers tend to obscure clearer indicators of business performance, and are sometimes distorted by media headlines. He pointed to the fact that, despite media coverage touting Disney overtaking Netflix in terms of total subscribers, alongside news that Netflix was stumbling, Disney was still burning money.
In the third fiscal quarter of this year, Disney+, Hulu and ESPN+ combined to lose $1.1 billion, while in the second quarter Netflix had a positive cash flow of $12.7 million. .
“So which would you rather be, Netflix or Disney?” said Rayburn.
What is a success?
The different metrics companies use also make it more difficult to define success, especially because platforms can aim for different goals.
For example, HBO Max said that almost 10 million people listening to the premiere of the ‘Game of Thrones’ spin-off ‘House of the Dragon’, making it the company’s most-watched premiere. At Netflix, the latest season of “Stranger Things” became the platform’s second most-watched series and racked up over a billion hours of viewing – but the show lasted around 13 hours. “Squid Game”, Netflix’s most popular series, lasted 8.2 hours. So, before we even get into the differences between the two main shows, you have one platform using hours as a metric, while the other uses households.
To complicate matters further, Netflix’s decision to expect to watch only the first two minutes from one of his films.
“Defining success,” Rayburn said. “My industry uses all these high-level generic terms that can’t be defined because there’s no methodology behind them.”
Smith argued that Disney had been incredibly successful in forging its way into the market and competing with Netflix, which had a huge first-mover advantage. Disney’s late entry into the race also helps explain why it’s still losing money on streaming. People were probably already Netflix subscribers, and Disney needs to convince them to spend more money to access its service, which is a tough question.
“Numbers make for great headlines, but the big issue here, the real battle here, is content,” Smith said. “And customer retention, customer lifetime value and things that are really hard to put into numbers.”
There has been a movement to try to find that common denominator to compare these services with, the one that is used in most other retail industries – average revenue per user (ARPU).
“That would be a very ironic thing, and what’s happened to Disney over the last few weeks is that they’ve actually lowered their [long-term forecast] for subscribers,” Ranganathan said. “And the market actually rewarded them for it.”
Indeed, by cutting its subscriber count and not paying for expensive content, Disney will actually increase its profitability, and its ARPU will be higher, according to Ranganathan.
Smith said ARPU is the obvious metric to use because that’s what everyone is doing.
“Even there, however, it’s a limited metric,” Smith said. “It’s a good metric. But studios won’t share the most important competitive metrics unless it makes them look good.
Thanks to Alicia Benjamin for writing this article.