You’ve likely heard of the streaming wars — the battles between companies like Netflix and Disney jockeying for video supremacy.
But even though Disney announced on Aug. 10 that it had surpassed Netflix in the race for global subscribers, it’s hard to tell exactly who is “winning.” The companies are notoriously secretive about their internal metrics, and while they are clear about how they measure users in their financial filings, from company to company it’s more like comparing apples to oranges … to a cat.
The result is a multibillion-dollar horse race without a common denominator or finish line, making it nearly impossible to tell who’s winning.
“No one knows, and that’s not an accident,” said Michael Smith, a professor of information technology and marketing at Carnegie Mellon University.
A numbers game
The figures companies release are hard to parse, in part because firms present their subscription and viewer numbers in such a way that is most favorable to them.
Disney, for example, counts one subscription to its streaming bundle — which includes Disney+, Hulu and ESPN+ — as three separate subscriptions. In a more transparent world, Disney would share the unduplicated household numbers, making clear how many of its users have gone for the bundle and easing comparisons to Netflix and other streaming services. But it doesn’t. And two other major players, Amazon Prime Video and Apple TV+, don’t release numbers at all.
“Disney is triple counting,” said Geetha Ranganathan, a media analyst at Bloomberg Intelligence. “That’s what most of the other services are doing as well [outside of Netflix]. So wherever they have a bundled product — let’s say you have subscriptions to Showtime and Paramount+ as a bundle — they’re counting that as two subscriptions, even though technically it should just be one.”
And it’s not just an issue from streaming company to streaming company, but also when it comes to how to compare the industry to cable television writ large.
According to Nielsen, the preeminent tracker of TV audiences, steaming overtook cable television for the first time ever in July. Streaming gobbled up 34.8 percent of total television consumption, while cable fell slightly behind with 34.4 percent.
But that analysis didn’t count all of the ways and devices people use to stream content, said Dan Rayburn, a streaming and media analyst.
“Nobody stops to question Nielsen’s methodology because if you look in the fine print, they’re not tracking any streaming on tablets or phones,” said Rayburn. “So streaming already passed cable in terms of total number of hours viewed, years ago.”
Rayburn also argued that the numbers tend to obfuscate more clear-cut indicators of companies’ performance, and they sometimes get warped by media headlines. He pointed to the fact that, despite news coverage touting Disney pushing past Netflix in terms of total subscribers alongside news that Netflix was stumbling, Disney is still burning through cash.
In the fiscal third quarter of this year, Disney+, Hulu and ESPN+ combined to lose $1.1 billion, while in the second quarter, Netflix had a positive cash flow of $12.7 million.
“So who would you rather be, Netflix or Disney?” said Rayburn.
What’s a success?
The varying metrics that companies use also make it harder to define success, not least of which because the platforms may be striving toward different goals.
For example, HBO Max said nearly 10 million people tuned into the premiere of “Game of Thrones” spinoff “House of the Dragon,” making it the company’s most viewed premiere ever. Over at Netflix, the most recent season of “Stranger Things” became the platform’s second-most-watched series ever and racked up more than 1 billion hours viewed — but the show was about 13 hours long. “Squid Game,” Netflix’s most popular series, was 8.2 hours. So even before you get into the differences between the top two shows, you have one platform using hours as a metric, while the other is using households.
Complicating things further is Netflix’s decision to count watching only the first two minutes of one of its movies.
“Define success,” said Rayburn. “My industry runs around using all these high-level generic terms that cannot be defined because there’s no methodology behind them.”
Smith argued that Disney has been incredibly successful elbowing its way into the market and competing with Netflix, which had a huge first-mover advantage. Disney’s late entry into the race also helps explain why it’s still losing money on streaming. People were likely already subscribed to Netflix, and Disney has to convince them to spend more money to come onto its service, which is a tough ask.
“The numbers make for good headlines, but the big thing here, the real battle here, is about content,” said Smith. “And customer retention, customer lifetime value and things that are just really hard to summarize in the numbers.”
There has been a movement to try to find that common denominator to compare these services, one that is used across most other retail industries — average revenue per user (ARPU).
“Something that very ironic would be, and this has happened to Disney actually over the past few weeks is, they actually lowered down their [long-term forecast] for subscribers,” said Ranganathan. “And the market actually rewarded them for that.”
This is because by taking down its subscriber numbers and not paying for expensive content, Disney is actually going to boost profitability, and its ARPU is going to be higher, according to Ranganathan.
Smith said ARPU is the obvious metric to use because that’s what everybody else does.
“Even there, though, it’s a limited metric,” said Smith. “It’s a good metric. But studios aren’t going to share the most important competitive metrics unless it makes them look good.”
Thanks to Alicia Benjamin for copy editing this article.