Netflix has created a “better mousetrap” but 3 traditional players set to enter fray

Michael Nathanson, equity analyst and co-founder of MoffettNathanson, believes that economic returns for traditional media companies getting into the on-demand business will not be as attractive as past business models. But there is still potential for three of the biggest traditional players to capitalise on the new, on-demand media opportunity.

The players he believes are best placed to withstand the onslaught of Netflix, Amazon, Google, Facebook and now Apple, are: Disney, owner of Marvel, Pixar and Star Wars; AT&T, the owner of WarnerMedia and HBO (with a SVoD called HBO Max); and thirdly, Comcast, which owns NBCUniversal and Sky. “Future economic returns will not be as attractive as in the past,” said Nathanson, “But that’s just life.”

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What the traditional players need to appreciate is that Netflix has created a “better mousetrap” by offering a wide variety of content of both acquired and originals, explained Nathanson, who co-founded MoffettNathanson, an independent equity media and communications subscription research company in New York in 2013. “It’s really the Netflix longtail approach that is key,” added Nathanson.

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When MoffettNathanson conducted a poll of 429 Netflix subscribers about their favourite shows on Netflix, 271 titles were cited but only seven programmes attracted more than 5% of the responses.

The top programme was Stranger Things with 13%, followed by Orange is the New Black at 10%. These are both Netflix originals. The next biggest shows are acquisitions: The Office, (8%), Friends (7%). Gracie and Frankie (6%) is a Netflix original as is Ozark (5%). The rest of the titles garnered less than 5%. “If we had asked the same number of people to give us their favourite shows on HBO, we’d probably only get 20 to 30 shows in the answers. That’s the difference,” says Nathanson.

The other lesson that the soon-to-launch SVoDs from Disney, WarnerMedia and NBCUniveral/Sky need to appreciate is that Netflix subscribers really prize being able to binge watch shows; the fact that the shows are not interrupted by advertisements; and that everything is on demand.

However, Nathanson says that traditional companies moving to a direct to consumer (DTC) model should take heart that more respondents (67%) were attracted to streaming services by “existing shows I used to watch on broadcast” versus recommendations from friends (66%) and browsing on the streaming services website (59%). “The fact that ‘existing shows I used to watch on broadcast’ scored that high gives a ray of hope to broadcasters transitioning into the on-demand space,” says Nathanson. “The addition of library strength with brand awareness and brand franchises are underestimated. I think given these together that all the studio players like Disney and WarnerMedia stand a good chance of being successful.”