But it has upended the business model of broadcasters and movie studios, which were used to controlling access to their content and profiting from advertising and high-margin DVD sales.
First, the new online distribution platforms won huge subscription audiences by aggregating a lot of library content cheaply. They also improved the user experience by allowing binge viewing and ditching the ads. (Amazon’s current UK marketing for Amazon Prime Video proclaims: “And it’s all ad-free”, an irony given the ad is appearing on broadcast TV.)
Now the online platforms are outspending broadcasters and film studios by hiring the best talent to make original shows and are using their audience data to decide whether to commission hits such as House of Cards and The Crown.
So far the war for content has been over drama but the online giants are targeting sport such as English Premier League football rights, which come up for auction this year.
All this explains why Disney has cut its links with Netflix. However, launching its own streaming site is a gamble. Disney may be the world’s most recognised entertainment brand but many media companies have struggled to sell content directly to the consumer. Record labels failed to create an alternative to iTunes and have let Spotify, Apple and Amazon lead the way in music streaming. Film studios have had little luck with Ultraviolet, an online platform for consumers to buy and collect movies. And book publishers have found it tough to get into digital distribution, although print sales have been surprisingly resilient.
Other TV companies must now decide if they will follow Disney and go direct to the consumer.
That could theoretically lead to a great “unbundling”. The consumer would no longer subscribe to a “bundle” of channels and programmes from one provider and could instead sign up to lots of rivals.
This is already happening to an extent. Netflix subscribers are more likely to have pay-TV such as Sky. They might subscribe to Spotify too.
But, taken to its logical conclusion, a great unbundling would be madness. Consumers like simplicity and lots of different accounts and direct debits would mean inconvenience.
Recent online history also shows that only a very small number of players with huge scale tend to dominate in any sector. That must be a worry for the BBC, ITV and Channel 4 which look pretty small globally.
The great streaming wars are already leading to consolidation. AT&T is merging with Time Warner and 21st Century Fox wants to buy Sky. Netflix is taking on more debt to fund its expansion.
As the stakes get higher, some companies will not be able to afford to stay in the game.
