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Alas, Winners Arise from the Ashes of the Pandemic

At the outset of the 2020 pandemic, a popular mantra was that “we are all in this together” and no single community would escape the negative and destructive economic effects that a shuttered populous would have on the whole of the marketplace. Initially, the effects of shuttered businesses and the closing of schools, workplaces, and campuses across the economy triggered near panic among businesses and consumers alike. The economic crisis is an environment that lends to the over-statement of dire predictions for the future of everything commerce and a momentary time when the suspension of many truisms abounds. It was as if the absolutes of the laws of competition were about to be unrealized in the face of COVID-19.

But soon reality emerged and winners began to arise from all the ashes of those lost to the effects of the pandemic. It is a truism that has occurred throughout history even during the world’s most traumatic periods of economic strife. As millions sequestered in homes, locked out of traditional entertainment venues, streaming, the opportunity to view a vast range of entertainment through an internet connection in consumers’ homes, soon emerged as a clear winner. Few businesses will have the opportunity to openly champion how they benefited from the shelter-in-place orders across America, but video streaming may just be one entertainment industry segment that was in the right place at the right time.

Major film studios, attempting to stem the loss of the closing of motion picture complexes worldwide, turned to home streaming services to connect the latest products with locked-away consumers. The path to sustaining ongoing viability and profits in the movie-making industry was to expedite the latest movie’s release to home viewing, mainly through pay-for-view streaming services. The reordering of an entire established distribution channel will likely shift the fortunes of the entertainment industry players forever.

The year 2020 saw a record increase for paid streaming services for industry leaders, like Netflix and Disney, and ignited a bevy of new competitors into the marketplace, a natural response for free markets. According to a recent study by Ampere Analysis, “The United States has nearly 340 million subscription contracts to OTT streaming services. The report further showed that at the end of first-quarter 2021, an average U.S. consumer now subscribes to four or more VOD services, with one-quarter subscribing to even five services.” Subscriptions for video streaming services topped 1 billion consumers in 2020 for the first time, accounting for a whopping $68.8 billion.

The successes in the streaming sector come at the expense of the industry loser, paid TV cable, satellite providers, and multiplex theaters, who have relinquished over 100 million U.S. households to streaming since 2019, a loss which is expected to continue even further in the next five years. With the shift in fortunes expected to continue, streaming service leaders are tightening up operations to stem off the incursion of new industry competitors. But staying on top of any competitive field of endeavor is not easy or certain for any market player no matter the size of the advantage.

Netflix is focusing on fulfilling customers’ demand for new content and expanding efforts to produce new original content in hopes to keep the 200 million subscribers tuned in as they initiate an unpopular crackdown on password sharing, a practice where a paid subscriber shares the membership benefits with other non-subscribers outside the home. But the targeting of members who share passwords may come with the risk of increasing the momentum of new competitors. “We believe that any broad crackdown on password sharing could revive past pricing sensitivity concerns for likely marginal users, even though recent Netflix price increases have been readily absorbed by its base,” says Benchmark analyst Matthew Harrigan. It is clear that the streaming giants are not standing still and basking in the unprecedented success thrust upon them by a hundred-year crisis.

The absolute that an individual’s market success will beget increased attention and new market entrants are being realized as the pandemic subsides. As always in a competitive environment, challengers will impact a leader’s market share by providing improved quality and lower prices. Current market leaders will need to pay close attention to the trends in emerging technology and remain customer-centric in long-term strategies in order to remain at the top of the list of pandemic survivors.