The streaming wars between Netflix, Apple, Amazon and HBO represent capitalism at its best
Okay, okay, I will admit most of us could probably live without Inspector Gadget 2 or The Princess Diaries available immediately and on-demand on every device we own. Even so, when Disney launches its hyped streaming service to rival Netflix early next month it will have some great content. From Star Wars to Snow White, there will be feast of fantastic programmes both classic and completely new. With Apple and HBO joining the fray as well, and with Amazon ramping up its service, streaming promises to be a battle every bit as epic as one of the fight scenes in the Game of Thrones prequel coming to HBO.
Over the next few months, there will be lots of attention on the cost of that, the stakes for the different companies, and the billions that will potentially be made or lost. But amid all the red ink that will no doubt be spilled one thing should be clear. This is capitalism at its best. We are witnessing a burst of innovation; we are seeing a new form of creativity emerge; and consumers are being subsidised by investors. Free markets don’t have many defenders at the moment. But the streaming wars will be a lesson in how they remain the most powerful way of organising an economy so it works for everyone.
Netflix was never going to have the market to itself. With 160 million paying subscribers around the world, it has proved that there is a vast demand for a pay-tv service delivered over the internet with lots of high-quality original content mixed in with a few classics. Other media and technology companies were always going to want to take a slice of that pie.
Amazon has already pumped billions into its Prime service which offers TV as an add-on to its delivery service, and that will get even better later this year when it starts showing live Premier League football. But the competition is now turning serious. Next month Disney-Plus will launch, first in the United States, and then globally, with its vast library of films and plenty of new shows.
Apple will launch its streaming service, potentially bundling it with music, and with shows featuring Jennifer Aniston (surprisingly the equivalent of a tactical nuclear weapon in the streaming wars) and Reese Witherspoon. Next year, they will be joined by HBO Max, which along with lots of new content will screen classic shows such as Friends (Jennifer again!). There will be at least five big budget streaming services to choose from.
How that plays out remains to be seen. One, two or perhaps even three might be able to operate in the market at the same time, even if it seems unlikely that all of them can find a place. Apple and Amazon’s ability to mix TV with other services might prove decisive: streaming could turn into a loss-leader for an array of other products.
Or else a completely new player might emerge that combines the best of all the different services. We will find out over the next couple of years. One thing should surely be clear, however. The streaming wars are a reminder of what a free market gets right. Here’s why.
First, it drives innovation. We are currently witnessing the greatest change in the way television is made and delivered since it first became a mass medium way back in the 1970s. The old model of advertising or licence fee funded broadcasting, organised on national lines, is dead in the water. It is being replaced by a voluntary subscription model, delivered globally. Instead of watching free British, American or German TV according to where we live, we all watch Netflix or Prime. You can go anywhere in the world and have a conversation about whether you enjoyed Stranger Things or House of Cards. You can argue about whether that is better or worse – but there is no question something completely new has been created.
Next, it has ignited a burst of creativity. As the critics rightly point out, we are living through a golden age of television. The Crown is not quite the most expensive TV show ever made (that remains the final series of Friends – Jennifer again!) but it is very close. Roma, from Netflix, collected lots of awards, including the Oscar for best director, and Martin Scorsese’s The Irishman, released next month, presumably to detract attention from Disney-Plus, promises to be one of the films of the year.
In truth, the streaming box set is a whole new art form, somewhere between film and the novel. Some of it is rubbish. Some of it is a bit meh. But some of it is among the most exciting art being created this decade – and that is surely of significance as well.
Finally, consumers end up as the real winners. Right now, none of the streaming services makes a profit. Netflix has turned into a giant machine for taking money from Wall Street and transferring it to writers, actors and directors, and ultimately to consumers in the form of amazing programs at very, very cheap prices. Both Apple and Disney will dip into their cash reserves as they roll out their services. Sure, the plan for all those companies is to tolerate the losses for a while, and then make lots of money once they have a lock on the market. We will see. At the moment, viewers are being massively subsidised.
In the wake of a financial crash, with stagnant growth, and rising worries about inequality, free markets don’t have many defenders. Regulation, taxes and state control are back in fashion. But unfettered, sometimes brutal, always hectic, competition between companies and entrepreneurs remains a system with an unparalleled ability to drive innovation, and to provide fantastic choice at bargain prices. The streaming wars will deliver some great shows. But, more significantly, it will be a lesson in what makes free market capitalism such a powerful way of organising an economy – and that will be worth remembering as you settle down to re-watch Toy Story on Disney Plus.
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