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E. Current Market
— Fulgueras, B. & Gallardo, C.
One of the conveniences that streaming services provide is their attainability - there is no need for consumers to venture outside. With people staying indoors during the pandemic, the streaming service industry has been flourishing ever since. There are three implications of this paradigm shift: the shift in the distribution pattern of movies and entertainment, its effects on the cinema industry, and lastly, the implication to consumers behavior.
The Implications of Convenient Access to Consumers Behavior and Reception — Fulgueras, B.
Over the past years, millions of people have embraced digital streaming services. Today, six video streaming companies have more than 90 million subscribers and about 11 other companies with at least 8 million subscribers. The biggest of them includes Netflix and Amazon Prime Video, with more than 204 million and 150 million subscribers, respectively. Disney+ was only launched in November 2019, and the company predicted that it would have more than 85 million subscribers by 2024. Today, it already has 95 million subscribers. The massive growth of subscribers for digital streaming companies can be attributed to the unexpected Covid-19 pandemic (Wallach, 2021).
Streaming companies have changed the way people watch television nowadays. According to Nielsen, a market research firm, the average viewing time of people on streaming videos increased by about 75% from 2019 to 2020. In the UK, the average daily viewing time of adults in watching movies or television series from streaming companies is about 5 hours and 40 minutes. It is higher by 47 minutes before the pandemic time. In addition, 80% of the households in the UK are connected to the internet (Wakefield, 2021). In the United States, 26% of the time spent on watching television is accounted for by video streaming companies such as Netflix, Amazon Prime Video, and Disney+ (Bursztynsky, 2021).
The increase in the number of subscriptions for the video streaming companies and the increased viewing time of consumers in streaming services can be attributed to the convenience it brought to the consumers. In the past, people had to buy DVDs or VCD so that they could watch their preferred movie anytime. In this case, consumers are concerned with ownership. Today, people can subscribe to their preferred video streaming company and watch any movie or video anytime. They can also access or watch their preferred video anywhere since it is accessible on mobile devices. The video consumption of people is more personal and safe. They would not need to go out to watch their favorite shows or movies.
From Cinema Distribution to Giant Streaming Companies and Their Distribution Rights — Gallardo, C.
In retrospect, streaming services disrupt traditional media distribution, particularly the field of the movie industry. Initially, movie producers would distribute their creations to several movie theaters for consumers. The consumers are used to going to movie theaters, paying ticket admissions, and watching movies. However, in the case of streaming services, consumers can get direct access to a movie or show by subscribing to a streaming service and paying monthly fees. Because production companies are beginning to partner with various streaming platforms to get their work directly to viewers, this process puts the cinema and movie theater sector in peril.
According to Arkenberg et al., movie studios rely on a movie's box office success in theaters before negotiating distribution fees with streaming platforms; the higher the gross, the higher the bid streaming platforms would offer (2020). Furthermore, they stated that production companies receive 45% on average revenue for theatrical releases; cinema distribution is the primary profit-generating viewing option for movies. The image below is the traditional duration and process of movie distribution from Deloitte Insights.
Illustration 1. The traditional Hollywood windowing system.
Image source: https://www2.deloitte.com/us/en/insights/industry/technology/future-of-the-movie-industry.html
It can be seen from the illustration that theater viewing lasts for a couple of months before a movie can be on streaming platforms; this method ensures that they are exclusively for cinemas distribution. However, this was the pre-pandemic situation.
Recently, there is also a considerable shift within movie distribution and their streaming service tie-ups. Production companies are starting to take control of their distribution rights by directly handling their content through creating their streaming service platforms. For example, the Disney company released their streaming service Disney+, where they exclusively stream their productions and mainly focus on improving their streaming services (Whitten, 2020). The new strategy disrupts the clearinghouse method Netflix utilizes (Berkeley Economic Review, 2019). However, Netflix's answer to several movie production companies pulling out content from their platform is to produce original works to enhance their library catalog. From cinema theaters acting between producers and consumers, streaming services disrupt this pattern and the market. The way streaming services impact both the market and the consumers' behavior exemplifies why it is a disruptive technology.