The Rise of Netflix and Streaming (Part-1)

Introduction: 

It used to be that if you wanted to watch TV, you had to pay for a big cable package with lots of channels you didn't even watch. The introduction of Netflix enabled users to watch whatever they wanted with no commercial breaks at one simple monthly price. This article will look at how streaming got so big and why so many companies decided to join in. The first part is about this early, exciting time of fast growth and competition.

Netflix's success was the result of a smart business plan that took many years to build. The company started in 1997 by mailing DVDs to people. But the real game-changer was when it started streaming movies and shows online in 2007. The first part of their plan involved getting a huge library of shows and movies from other companies and letting people watch them with a monthly subscription. This was much better than going to a video store, and it quickly put companies like Blockbuster out of business.

This model worked because Netflix could offer a massive number of niche movies and TV shows that a regular video store couldn't afford to keep on its shelves. This allowed them to attract a wide variety of customers, all with different tastes, without the high costs of physical retail stores. With a low monthly fee, customers could watch as much as they wanted. This availability created a lot of convenience for their consumers, resulting in the creation of brand loyalty 

The next big step for Netflix was to start producing its own shows and exclusives. Instead of just renting other people's content, they started making their own exclusive shows. This was a crucial move. Relying on licensed content from other studios was risky because those studios could always take their content back or could offer pricey deals for popular existing content renewals. By making their own content, Netflix created something no one else had, which gave them a big competitive advantage. This move transformed the company from a simple streaming service into a powerful media studio. By 2024, Netflix had become the world's most-subscribed video-on-demand service with over 301 million paid members globally. This proved that their direct-to-consumer model could work on a massive scale.

This strategy created a powerful flywheel for Netflix since the more people who subscribed to Netflix, the more money the company had to spend on making new, popular shows. These new shows, in turn, attracted even more subscribers, which kept the whole cycle going. For years, this formula was unbreakable. The company’s main goal was to get as many subscribers as possible, even if it meant spending huge amounts of money on content and marketing. They believed that once they were big enough, making a profit would naturally follow.

New Entrants in the Market

For a long time, the big media companies were satisfied to get paid by Netflix to use their shows and movies. But as Netflix grew and became more and more popular, these companies realized they were helping a competitor get stronger. They understood that their most valuable assets were what made them special. So, they decided to get in on the action themselves.

This led to a huge rush of new streaming services. Companies like Disney, which owns a treasure trove of content from Disney, Pixar, Marvel, and Star Wars, launched Disney+. Warner Bros. Discovery created Max, which combined the high-quality shows of HBO with a much bigger library. Comcast's NBCUniversal launched Peacock, and Paramount Global created Paramount+. The streaming world, which was once dominated by Netflix, was now filled with new players, each fighting for a piece of the audience.

In 2024, the six largest global content companies—Disney, Comcast, Google, Warner Bros. Discovery, Netflix, and Paramount—spent a combined total of around $126 billion on content, fueling a content war. A huge portion of this money was specifically for their streaming platforms. For example, Netflix spent an estimated $15.3 billion in 2024, while Disney, with its full control of Hulu, spent even more, around $35.8 billion.

For the customer, this meant more choices than ever. But it also meant that all the great shows and movies were no longer in one place. To watch Star Wars, you needed Disney+; to watch Friends, you needed Max. This led to subscription fatigue. As the number of services grew and their combined cost got higher, streaming started to look a lot like the expensive cable packages it was meant to replace.

Saturated Market

In business, a saturated market is when a product has been bought by most of the people who are likely to buy it. For the streaming industry, this is now the case in places like the U.S. and Europe. The time of fast, easy growth is over.

Data clearly shows this. While Netflix's subscriber growth was once very fast, it has now slowed down in many regions. At the same time, its competitors have also grown very big. Amazon Prime Video, for example, has a huge market share, partly because it comes with Amazon's core Prime membership, which many people already have.

The price of competing in this crowded market has driven up costs and made it harder to make money. Companies are spending billions on marketing to get new customers and keep the ones they have. At the same time, the cost of making new content is constantly going up. This has created a strange situation: even though more people are watching streaming than ever, many of these companies are not actually profitable. They are spending so much to get and keep customers that they can't seem to make a profit.

The biggest challenge is no longer just attracting new customers—it’s keeping them. It's very easy for a person to subscribe to a new service, but it's just as easy to cancel it. This problem is known as churn. As content is spread across many different services, people are more likely to subscribe to a specific show and then cancel once they've finished it. This makes it very hard for a company to have a steady, predictable income.

Part 2 will focus on how large companies are adjusting to this new operating environment and the impact on profits of the companies in the saturated streaming market.