From the outside, Netflix and TikTok may not look like competitors, but they are.
One is consumed on large screens, the other on small ones. One is long, the other short. One spends billions of dollars in capital to create content, the other gets millions of hours of programming virtually for free. One is paid, the other is 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. On the one hand, it’s all about OTT and streaming, with Disney+ and HBO Max, Apple TV+ and Peacock, Hulu, Amazon Prime and dozens of others. And on the other hand, it’s Reels from Facebook/Meta, Shorts from YouTube, Triller, Likee, Snapchat and more. But despite its recent descent from inevitable child status as our post-pandemic inflationary times caught up with Netflix, it’s still the streaming giant with more subscribers than any other OTT service. And TikTok, which just had its most profitable quarter ever with $840 million in in-app revenue, is now clearly the most massive video/social/entertainment app provider, despite the efforts of YouTube and Meta.
“The big screen just disappears, let alone the big plasma at home and your surround sound system, right?” Krantz told me recently on the TechFirst podcast. “Everyone, especially Gen Z, is spending time on mobile and consuming content.”
Next to gaming, OTT/streaming is the largest single category in terms of mobile consumer spending, Data.ai says in a recent report. So programmed television will not disappear completely, and Netflix and Co. are not only intended for the big screen on the wall.
The challenge is that their business model — expensive content for paying customers — is much more capital-intensive than TikTok or Meta or Snapchat, while built on a more limited collection than established companies like Disney or HBO. Switching to an ad-supported model, which Netflix has committed to, will take time and focus, and will have the potential to distract from the product that has brought them over 220 million paying customers.
OTT still has three times consumer spending, Data.ai says, compared to short video apps.
But that doesn’t apply to all segments, says Krantz.
“Gen Z [is] They spend about three times as much on short videos as they do on OTT,” says Krantz. “This is a really interesting trend…with this very loyal base, can TikTok move into other categories and then start trying to increase monetization more in line with the larger subscription games on OTT?”
At the end of the day, the game is bigger and the pie is bigger.
Because there is another huge category that also eats up time and revenue: gaming. And which extends to video, concerts and social categories.
“To complicate things further, there’s a third player here,” says Krantz. “That’s the base we’re not talking about today, which is games, which is still the largest category. And they’re moving into media and entertainment… so it’s like a WWE match.”
That’s probably one of the reasons Netflix announced its expansion into gaming, available in 190 countries worldwide, a year ago. 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’s nothing new: it’s basically been trending for a decade.
Though teens may not watch the big screen, many spend significant amounts of time watching YouTubers on sometimes lengthy shows.
This is precisely why players seem to be converging: TikTok is allowing longer videos, YouTube is doubling down on shorts, and Netflix is exploring options for other ways to attract attention. Not to mention Spotify entering videos with video podcasts or Meta/Facebook trying to shift the entire conversation – and consumption model – in the Metaverse to VR and AR.
The next decade will be interesting.