From the outside Netflix and TikTok may not look like competitors, but they are.
One is consumed on big screens, the other on small. One is long-form, the other short. One consumes billions of dollars in capital to create content, the other gets millions of hours of programming virtually for free. One is pay-gated, the other free and ad-supported.
“You’re really trying to capture eyeballs and the eyeballs can only be in so many places, right?” says Data.ai CEO Ted Krantz.
Of course, it’s not just Netflix versus TikTok. One the one side it’s all OTT and streaming, with Disney+ and HBO Max, Apple TV+ and Peacock, Hulu, Amazon Prime, and dozens of others. And on the other it’s Reels from Facebook/Meta, Shorts from YouTube, Triller, Likee, Snapchat, and more. But in spite of its recent fall from can’t-miss-kid status as our post-pandemic inflationary times caught up with Netflix, it’s still the giant of streaming with more customers than any other OTT service. And TikTok, which just had the single most profitable quarter of any app ever with $840 million in-app revenue, is clearly now the most massive player in video/social/entertainment apps despite YouTube’s and Meta’s best efforts.
“The big silver screen is just disappearing, let alone the big plasma at home and your surround sound system, right?” Krantz told me recently on the TechFirst podcast. “Everybody, especially Gen Z, is spending time on the mobile device consuming content.”
Besides gaming, OTT/streaming is the single biggest category in terms of consumer spend on mobile, Data.ai shares in a recent report. So programmed viewing is not entirely going away, and Netflix and company aren’t just for the big screen on the wall.
The challenge is that their business model — expensive content for paying customers — is a lot more capital intensive than TikTok’s or Meta’s or Snapchat’s while building from a more limited collection than established players like Disney or HBO. Moving to an ad-supported model, which Netflix has committed to, will take time and focus, and has the potential to detract from the product that has won them over 220 million paying customers.
OTT still has three times the consumer spend, Data.ai says, compared to short video apps.
But that doesn’t hold true for all segments, Krantz says.
“Gen Z [is] spending about three times as much in the short-form video than they are in OTT,” Krantz says. “That’s a really interesting trend … can TikTok move into other categories with that very loyal base and then starting to try to increase the monetization more in line with the bigger subscription plays that are on OTT?”
Ultimately, the game is bigger, and the pie is bigger.
Because there’s one other huge category that is also sucking up time and revenue: gaming. And which is expanding into video, concerts, and social categories.
“To make it even more complicated, there’s a third player here,” says Krantz. “That is the base that we’re not talking about today, which is gaming, which is still the biggest category. And they’re moving into media and entertainment … so this is like a WWE match.”
That’s likely one of the reasons why Netflix announced its expansion into gaming a year ago, which is available in 190 countries globally. And it’s one of the causes of once-separate categories merging in sometimes unpredictable and chaotic ways.
Ultimately, who wins will be determined by changing attitudes towards entertainment. What we do know is that people are spending more time playing games and using their phones while watching fewer movies and TV shows. And that is nothing new: it’s been trending for basically a decade.
Still, while teens may not be watching on the big screen, many are spending huge periods of time watching YouTuber in sometimes-longish shows.
Which is precisely why the players seem to be converging: TikTok allowing longer videos, YouTube doubling down on Shorts, and Netflix looking at options for other ways of occupying attention. Not to mention Spotify entering videos with video podcasts, or Meta/Facebook attempting to shift the entire conversation — and consumption model — to VR and AR in the metaverse.
The next decade is going to be interesting.