Entertainment wars of the future will go beyond video streaming

Digital Media updates

TV’s streaming wars, pitting the biggest media companies against tech concerns such as Amazon and Apple, have barely begun. But it is not too early to make out the next battle lines that are forming, as today’s giants set their sights on an even bigger prize: dominance in online entertainment in all its forms.

The future struggle will involve reaching beyond video to monopolise the attention of audiences in the home and on the go in all types of entertainment. And it will bring “one subscription to rule them all”, as the biggest companies use their ever-expanding armoury of digital properties to squeeze out smaller entertainment rivals.

Netflix is among the first to lay the groundwork. It has recently hired experts in podcasting and video games as it looks for more ways to command its audience’s attention. Last month it also launched an online store to sell products linked to its shows, marking another attempt to deepen customer loyalty and extend the broader “experience” it is building around its content.

Disney, long the leader in assembling a diverse media empire around the “intellectual property” in its entertainment holdings, has also been trying out new, interactive activities that could one day reinforce its streaming services. These include sports betting — a sure way to hook future generations of fans as they stream the latest game from their couches.

Ideas like these show that the streaming giants have an eye on the long term, even as they bulk up their video services in the fight for a market that is still in its infancy. Excluding China, Netflix estimates that it is only in a fifth of broadband homes around the world. Disney’s purchase of Fox, Time Warner’s Discovery acquisition and Amazon’s offer for MGM all point to the urgency these companies feel to amass a stronger portfolio of video rights to attack this market.

Netflix, however, is looking beyond the video streaming arms race to prepare for the broader battle for attention. The goal of this diversification is straightforward: audience stickiness. With more things to watch, listen to and play, it hopes to give people in the more than 200m homes who pay for its service plenty of reasons to keep tuning in.

Amazon has played this game for user loyalty from the opposite direction, using video streaming as an extra lure to attract users to its Prime shipping service. Netflix, starting with video, is moving in a different direction. Its real competitors for audience attention, as its executives like to say, are Tik Tok, Instagram and the next hot new service to spread on the mobile internet. Mobile gaming — the first goal of its push into video games — is one way to prevent its audience from slipping away.

It will take years for the entertainment world beyond the streaming TV wars to take shape. But it already has a number of implications that will define the future shape of the online entertainment market.

One is that it will favour the big players. Companies that can make serious investments in new markets without feeling any pressure to reap an immediate return will have a big advantage.

This will present a serious challenge to smaller companies that specialise in only one corner of online entertainment. Spotify has moved from music streaming into podcasting, but it is not at all clear it will be able to withstand the attack from the giant streaming platforms of the future unless it finds much more to offer its audience.

Another message is that, rather than an array of different offers for their variety of digital services, companies like Netflix plan to sell a single, ever-expanding subscription. The goal of this new empire-building is not to create a diversified revenue stream. Rather, it is to prevent audience churn, maintain pricing power as competition for video streaming intensifies, and give potential new subscribers ever more reasons to sign up.

The all-purpose online entertainment giants of the future will also need a new set of skills. Companies such as Disney and Netflix are masters of amassing media rights and monetising them across global audiences. But they will need to master new forms of interactive entertainment — whether in video games, sports betting or the more social and communications-based services that thrive on smartphones — to keep audiences hooked.

The history of their efforts in this area is not encouraging. Disney’s unsuccessful attempts to build an interactive entertainment division date back almost to the dawn of the web. And media companies have dreamt for years of adding video gaming to their portfolios. The best they have to show for it: a steady stream of mediocre games spun off from popular media franchises.

With their direct-to-consumer streaming platforms and captive customers bases, companies like these now have another shot at becoming fully interactive entertainment giants. Let the battle begin.

richard.waters@ft.com