It started with Netflix, an internet service that provides thousands of hours of premium TV series’ and movies for one monthly rate. Oh, and did I mention that there are no commercials? All you needed is a computer, phone, or smart TV, and you can consume as much video content as you like. Soon it became apparent that if you have a streaming service, then you did not need regular, ad-supported TV. People are now canceling their traditional cable TV subscriptions by the tens of thousands. This trend is also known as “cutting the cord,” the cord being the coax cable delivering video from your cable box to your TV. Let’s dig into how cord-cutting will kill traditional TV.
A New Way of Consuming Video
Media content has gone through several paradigm shifts. In the 1950s, network TV displaced radio as the top model for entertainment. In the 1980s, cable TV became ubiquitous, providing dozens of new channels. Today, video is being consumed through online streaming services like YouTube, Netflix, Hulu and dozens of new services such as Disney+, Apple TV+, and soon to be released Peacock and HBO Max.
Each shift in the way we consume media has been driven by technology:
- Network TV required a television to replace the radio
- Cable required new cable boxes replace the rabbit ears on your TV
- Streaming requires an internet service provider and a smart device (such as a computer, smartphone, tablet or smart TV)
There is a learning curve to adopt each technology. In many ways, however, the advent of streaming content in the last five years has become a byproduct of widespread internet service. Either through highspeed internet to your home/work or wireless internet to your phone, you have the connectivity and the device. Streaming companies only had to prepare the content.
Netflix, the clear leader for streaming content, has also taken a different approach to previous media consumption models. Instead of having ad-supported content, Netflix collects revenue through a subscription model. To a certain degree, this is similar to the UK’s TV and Radio license that each person in the UK must pay every year to support BBC media content.
Having a subscription model introduces two exciting opportunities: a reliable and consistent revenue stream; content free from advertiser influence. For these two reasons, Netflix and the BBC can develop riskier content and lock in talent for multiple seasons at a time. For this reason, you do not see shows ending halfway through a season due to low audience figures.
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The Contenders
The new model for consuming video content is streaming. Let’s look at the key players in the industry.
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Netflix
The leader in the space with a global subscription user base of over 158 million subscribers. They maintain their dominance through massive investment in original content such as The Crown, The Irishman, Stranger Things, and Nailed It! The Netflix model is the one to beat. -
Amazon Prime
The second-largest video streaming company is Amazon Prime Video, with ~43 million viewers. However, it must be said that the actual number is somewhat unknown as Amazon gives away Prime Video with each Prime subscription. -
YouTube
YouTube has grown up from being the place to watch funny cat videos to the “go-to” place to find and learn about new content. YouTube makes it incredibly easy for any one person with a smartphone to become a video personality. Basically, YouTube owns unscripted, reality TV. It is struggling to compete with scripted programming, though. -
Hulu
In many ways, Hulu has sat in the shadow of Netflix, even though they have a very similar revenue model. The big difference is that Hulu does offer a traditional ad-supported model. It’s a little more complicated than that. Through a series of acquisitions, Disney has full control of the content and management of Hulu. It’s too early to tell how this will affect Hulu’s current base of 25 million subscribers. -
Disney+
Launched in the fall of 2019, Disney+ has landed with a splash with resounding success. Disney wisely added a massive selection of movies and TV shows from its back catalog and introduced hit new shows such as The Mandalorian (Baby Yoda, anyone?). -
AT&T’s HBO Max
Coming in 2020 (replacing HBO’s current streaming tool). -
All the others
There are a lot — Qibi, Peacock, and Crackle.
Common threads with many streaming services are the following:
- Subscription models
- Original content
- Repurposing cable content (such as The Office, Parks and Rec, and Friends)
Netflix has done the hard work of removing the sting associated with paying for content. The other providers should thank them for that. The repurposing of the older content is, in many ways, a way for you to know that the new content is going to follow known and comfortable models. Where streaming providers will succeed or fail depends on how much quality original content they provide.
This is Not a Streaming War
There are a lot of media outlets that like to call cord-cutting a streaming war, where each new company is competing with each other. This is not strictly correct. The new streaming media companies are not competing with each other. They are competing for the 1.64 billion people who watch traditional TV. Also, each provider is using video for different reasons:
- Amazon Prime Video supports customers who want to shop on Amazon
- Apple TV+ is integrated into Apple’s iPhone, iPad, Macs, and Apple TV devices
- Comcast and AT&T will want to use Peacock and HBO Max to support their internet services
Ultimately, there is plenty of room for all the services to grow. Cable and network TV are in the crosshairs, not other streaming service providers.
How Fast will the Transition Take?
In 2015, when Netflix was gaining momentum, many industry pundits thought that is would take at least a decade for traditional TV to be replaced by cord-cutters. Fast forward five years, and there are now 158 million Netflix subscribers, and Disney+ activated 15 million subscribers in three months. Comcast and AT&T are looking to leverage their legacy businesses to pull in subscribers for Peacock and HBO Max. In short, the giant companies are betting hard and seeing returns for their investments.
Think about the transition from the flip phone to a smartphone. That transition happened quickly, similar to what’s happening with cord-cutters when it comes to media consumption. Millennials will lead in cutting the cord (expect most to have switched by 2025) and will be followed quickly by Generation X. Older generations will likely hold onto the habit of cable TV for the simple reason that it is hard to break old habits, like keeping their home landlines. Eventually, cable TV will be consumed by new streaming models. That leaves one final group: Generation Z. Generation Z is a unique group in that they are part of the “never had a cord” group and only know streaming content from the cloud. The cable will likely adapt or simply be consumed by new streaming models.
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How Streaming Services Make It All Happen
Of course, none of these streaming services would be able to serve as many subscribers as they do without cloud computing. When Netflix first began operations in 1997, the company was operating its own data centers, which they did for a long time. After an embarrassing (and expensive) failure in one of it’s data centers, the company’s leadership decided that they had to move to the cloud. The migration to AWS took seven years to complete in 2016. Moral of the story, cloud migrations are aren’t easy.
That’s why cloud architects are in such high demand today. To start your career in cloud computing or take your existing one to the next level, Simplilearn offers a comprehensive selection of Cloud Computing Certification Training courses. Have something more specific in mind, like possibly trying to get a job at Netflix? Check out our AWS Solutions Architect Certification Training Course. While lifelong learning is always a good thing, the time to upskill and boost your career in IT has never been better.
