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The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.

[Author's Note: Two follow-ups to last Thursday’s essay: 

1. In the email version of Thursday’s essay “Having ‘Won The Streaming Wars’, What Will Netflix Become?”, the “thesis statement” of the original essay read “The long answer is Netflix management, but the short answer is Co-CEOs Peters and Ted Sarandos”. Because the essay was unusually focused on Peters, the sentence has been updated to read “The long answer is Netflix management, but the short answer is Co-CEO Greg Peters”.
2. On Thursday morning Stratechery’s Ben Thompson published an interview with Peters—literally as I was editing the final draft of the essay. The interview is a good read. One reader wrote to me, “This interview demonstrates your savvy point about having people who can code leading media companies” (you can read that essay here). It is a perfect example of Peters “going to great lengths to explain that the Netflix platform is the technological foundation of a more diverse set of entertainment offerings.” It also reflects the tightrope walk he faces in trying to explain the technology of Netflix’s business without confusing investors about the complexity of its business model.]

Thursday’s essay concluded that Netflix is gunning to be “the technological foundation of a more diverse set of entertainment offerings” but “what it ultimately will become in the long-run seems to be anyone's guess.” There is a fun way to reframe that conclusion: Netflix now owns some of the future of media distribution but is not betting on owning all of its future. What happens to the rest of the media distribution marketplace is anyone’s guess. 

That means there are two paths forward in streaming for legacy media, broadly speaking, First, license to Netflix when the opportunity arises—something that Warner Bros. Discovery is increasingly opting for, most recently with its “Sex And The City” library. The second is to instead monetize valuable library content elsewhere. 

The big question is what “elsewhere” looks like given that owned-and-operated legacy media streaming services are struggling to break even: Disney lost $4 billion in its fiscal 2023, and Comcast reported that Peacock lost $2.75 billion in 2023. When Paramount Global reports its results next month, it is likely to report additional losses beyond the $1.2 billion in losses it reported in the first three quarters of 2023. 

In other words, the conclusion that Netflix “won the streaming wars” needs to be reconsidered because the “win” may be narrower than perceived. Netflix is not emerging as the default subscription alternative for streaming all legacy media content. Nor is it an emerging default for Pay TV viewers: As Sarandos told investors on the call, “In our most mature markets, we're getting about 10% of TV time.” Nor is it emerging as a streaming platform, only, as it moves into gaming.

Imagining the future of legacy media distribution business models outside of Netflix's walled garden is now a different exercise altogether from imagining their future within Netflix.

Key Takeaway

Netflix appears to be saying there are other media distribution markets yet to be made outside the walls of Netflix for content that does not succeed within its walls. But, those models should be market-making, first, and content distribution models, second.

Total words: 1,200

Total time reading: 5 minutes