Then there was one: With Paramount’s entry into streaming, only one studio is sitting on the sidelines.

The pandemic separated the major streaming players from the minor ones. As movie theaters may return with less hold on viewers, the ground has shifted. The next twelve months should determine the next generation of entertainment. Center Director Jeffrey Cole explains.

By Jeffrey Cole

And then there was one!

With the March 4th launch of Paramount+, Viacom’s entrant into the streaming wars, there is only one studio, Sony, left without its own streaming channel.

Two years ago, there were six studios (before Fox disappeared into Disney). Only one of them, Warner Bros., had placed a bet on streaming.

Netflix, with an assist from Hulu, owned the streaming field. Warner Bros. had access to HBO as a sister company (now unified into the WarnerMedia brand along with Turner Broadcasting). HBO was barely a streamer in 2019 (the year after AT&T acquired Time Warner). It was a legendary pay TV service available on cable. Although founded in 1975, HBO didn’t even consider getting into streaming until only a few years ago with HBO Go and HBO Now.

A lot has changed in two years

Disney was the earliest of the surviving four studios to follow HBO/Warner into streaming. Recognizing the growing threat of Netflix, Disney made the bold decision to take all its content off the streaming giant. Soon after, it announced its own service: Disney+ premiered in November of 2019 at a cost of $6.99 per month.

The gods must have been looking kindly on Disney+ as its timing was perfectly positioned for the once-in-a-lifetime pandemic. A nation stuck at home 24/7, hungry for massive amounts of content as well as high-profile Pixar and Disney titles intended for the theater (Soul, Hamilton, Mulan), quickly moved to streaming. It was a gift to Disney.

Fifteen months after its premiere, Disney+ had 95 million subscribers. Recognizing that streaming was the future (and the only division that prospered during COVID), Disney completely re-organized the company around its new platform.

Although the first studio into streaming, WarnerMedia was barely a presence when it decided to merge HBO with its own library of content. It relaunched the whole thing as HBO Max in the middle of the pandemic on May 27 at a monthly cost of $14.99. HBO’s established customers were confused. What is HBO Max? Is it something different than HBO? Would it cost more? Did they have to get it? Although in the long run with all that great content, HBO Max will do just fine, it was a botched and confusing launch.

Today, HBO Max has an impressive 40 million subscribers, but it had 34 million before it changed its brand. It failed to reach many new customers and found it difficult to get existing HBO subscribers to convert. And it is priced more than Netflix and twice Disney+.

NBCUniversal, with its massive NBC and Universal catalog, was the third to stake its claim and it took a different approach. While it is available in pay versions ($4.99 per month with ads with an expanded catalog and $9.99 per month for even more content and no ads), Peacock starts for free with ads. With subscribers’ budgets stretched thin and hunger for content growing, it was the perfect alternative to paid services in the middle of a pandemic.

Like HBO Max, however, Peacock’s growth to 34 million viewers has not been meteoric. The move of the hugely popular The Office from Netflix to Peacock has attracted a lot of new viewers, which is odd considering the show was only modestly successful when originally on NBC.

NBCUniversal’s move into streaming left only Sony and Paramount on the sidelines.

From CBS All Access to Paramount+

In the first quarter of 2021, it is unclear if movie theaters will ever return to where they were in 2019 when seven films earned over a billion dollars at the box office. Fears of being left out of the most important new distribution chain have been keeping Paramount and Sony executives up at night. Paramount became the next to take the leap, leaving only Sony to start its own service or join with one of the others. Expect to see some movement there by late 2021.

Borrowing from Apple and Disney, Paramount added a + to its name. In what will be one of the footnotes to streaming history, CBS, now part of Viacom along with Paramount, already had its own streaming service when it was a separate company.

CBS All Access premiered in October 2014, the Stone Age of streaming. Only Netflix and Hulu began earlier. Priced at $5.99 per month with advertising and $9.99 per month without, it drew on the CBS library of current shows and old hits. Following the by-then established playbook (HBO, Netflix) CBS added original programming running a sequel to The Good Wife, The Good Fight, a new Star Trek series (Star Trek: Discovery), and a re-envisioning of The Twilight Zone.

It was a gem of a service with a good catalog of content, but it got caught in the war between CBS and Viacom that led to the re-merger of CBS back into the larger company. CBS never fully believed in the promise of streaming, seeing it as a threat to its own broadcast network (it was). They were unwilling to provide the programming budgets and marketing muscle to make the service the success it deserved to be.

Viacom combines the subscriber numbers for its Showtime and CBS All Access services at 19.2 million. A guess puts All Access at 12 million. With the content it had and real support, it could have been at 35 million.

What comes next?

This is the state of the streaming universe as the nation slowly begins to emerge from the scourge of the pandemic. What will happen when we no longer sit home watching television all day? Will our dollars ever go back to movies in the theater?

As Apple TV+ and Disney+ were about to premiere in November of 2019, I argued that people would pay for 2.5 of these SVOD services. The Center’s work shows that the average household is paying $315 per month for mobile service, broadband, cable or satellite television, and streaming, including music. That figure is unlikely to grow except through inflation.

In the first quarter of 2021, it is unclear if movie theaters will ever return to where they were in 2019 when seven films earned over a billion dollars at the box office. Fears of being left out of the most important new distribution chain have been keeping Paramount and Sony executives up at night. Paramount became the next to take the leap, leaving only Sony to start its own service or join with one of the others. Expect to see some movement there by late 2021.

Coming out of COVID, the 2.5 number has turned out to be a good prediction.

Three services are somewhat or completely exempt from the 2.5 calculation: Amazon Prime Video, Apple TV+, and Peacock.

Completely exempt is Amazon Prime Video. Reinforcing Jeff Bezos’ brilliance at understanding what consumers want (more than they do themselves), Amazon is not part of the monthly calculation of “How many services should I pay for?” or “Do I still need this streamer?”

Ask Amazon Prime Video subscribers how much the service costs and they will look at you puzzled and say, “Well, it’s free.” It’s part of the prime bundle, now more essential than ever because of the pandemic and changes in buying behaviors. Amazon Prime subscribers do not associate their annual fee with the video service. It does feel like it’s free.

Apple, although the biggest company on the planet, has the most modest streaming service in Apple TV+. With its small catalog, it is not competitive with the other streamers, even at $4.99 per month. But it you buy an Apple hardware product, the service is free for a year. This is Apple TV+’s future. It will drive hardware decisions and be viewed as a perk for owning an iPhone or iPad. In this way it is somewhat immune from the 2.5 calculation.

Peacock seems to be getting the most pickup for its free version, making it not part of a monthly budget.

Across the competitive landscape that Paramount+ has just entered, Netflix, Disney+ and HBO Max are competing to be part of that 2.5.

Netflix has emerged from the pandemic the most successful entertainment company in history. It owns the first dollars that anyone spends on entertainment each month. Netflix gets $13.99. Everyone else fights over the rest. Of the 2.5, Netflix represents 1.0.

That leaves HBO Max and Disney+ to do battle over 1.5 subscriptions for the average household. It means Paramount starts far behind of the 1.5 competition. They will have to find a way to get the consumer willing to expand to 3.5 or create programming more compelling than Disney or HBO Max. That will take immense amounts of money. It will be a tough slog for Paramount+.

We think the 2.5 limit is locked in for now, and nothing in the next few years will dislodge Netflix. Disney+ has a lot of subscribers, but that is boosted by very attractive offers for its first customers (I got three years for $130) as well as free service for a year for Verizon’s unlimited mobile customers.

Now that it is carrying the whole company, it is only a matter of time before Disney+ has to raise its $6.99 price. At $14.99 per month, HBO Max costs too much. WarnerMedia has already announced that it will introduce a cheaper version pricing it closer to Disney, Paramount, and Hulu.

Although smaller services like Discovery+ are still entering, all the major players (except Sony) are now on the streaming field.

Now things get really interesting.


Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.



See all columns from the center.

March 10, 2021