The COVID-19 pandemic has forced millions of Americans to work and learn from home. The same goes for entertainment. Without movie theaters, concerts, and live sporting events to attend, Americans have been consuming more content at home than ever before, including videogames, broadcast TV, cable TV, and of course, Internet video.
Among video services, the greatest growth during the pandemic has been for over-the-top, or 鈥淥TT鈥� streaming services. This, of course, should be no surprise鈥攑articularly in a work-from-home environment when both work and sleep schedules may be largely at a worker鈥檚 discretion. Rather than have to sit and wait for programs to air on traditional broadcast or cable TV services, or fumble with complicated time-shifting technologies, OTT consumers watch content on their own schedules.
Although there are several advertiser-supported OTT services, like YouTube, most growth is from paid subscriber-based OTT services like Netflix, Hulu, Amazon Prime Video, and Disney+. According to these four services accounted for 69% of new OTT subscribers during the pandemic, and 54% of households watching more television are doing so with OTT. Countless other paid subscriber-based OTT services also exist, including HBO Max, Apple TV+, ESPN+, Crunchyroll, Quibi, and Comcast鈥檚 recently-launched Peacock.
Among premium subscriber-based OTT services, Netflix is the clear leader. The purveyor of the smash hit Tiger King has done extraordinarily well during the pandemic, to reach its current global total of 193 million. In the United States alone,
Consequently, today, as measured by market capitalization, the largest pure media company isn鈥檛 Comcast, or Disney, or any other traditional, venerable industry giant. Instead, it鈥檚 Netflix, with a market cap of around $220 billion鈥攁head of both Disney ($210 billion) and Comcast ($196 billion). As for Disney and Comcast, both companies would likely be in weaker financial positions without interests in their respective OTT subscriber services: Disney+, Peacock, and of course, Hulu.
Additionally, Amazon, Google, and other companies that don鈥檛 primarily focus on media have substantial OTT interests. Amazon and Google are each valued at over a trillion dollars鈥攎ore than Netflix, Disney, and Comcast combined.
Year to date, Netflix鈥檚 market price has risen by over 50%. By comparison, most other major media companies have had stock price declines this year, led by Viacom, Discovery, and Fox, each off 29% or more.
Netflix鈥檚 growth hasn鈥檛 just been the result of COVID-19. Five years ago, Netflix wasn鈥檛 even one of But since then, Netflix鈥檚 stock price has risen by an astronomical 325%. Among other major media companies over the same time period, Charter Communications has done well with 205% growth. Yet several media companies have had share price losses over that period, with Discovery, Dish, and Viacom鈥檚 prices shrinking 35% or more.
Although Netflix owes its success to many things, two in particular stand out. First, being Internet-based, Netflix and other OTT services are technologically nimble. Netflix and its competitors are able to innovate new features and expand to new devices and screens via simple software updates. And OTT subscribers can search, find, and watch content at their leisure. For cord-cutting and cord-never millennials and Gen Zers鈥攁n increasing share of the population鈥攏o other method of video entertainment makes sense. Thanks to OTT services, they can watch they want, when they want, and on whatever device they want, unshackled from the constraints of specialized hardware or a linear programming schedule. By comparison, traditional cable and broadcast TV programming is often constrained to appointment viewing via limited physical hardware: cable boxes and antennas connected to traditional TV sets.
Second, and perhaps more importantly, Netflix and other OTT services do not face the same the same regulatory burdens that traditional media companies face. There are no ownership rules, must-carry rules, program-access rules, or industry-specific rules of any kind. The shadows of Netflix executives rarely darken Washington. Few other major media companies share this luck.
One might reasonably assume that, recognizing this ever-increasing competition from OTT services, the federal government would relax burdensome rules and regulations for traditional media companies, thereby allowing them to more fairly compete with the likes of Netflix. But that hasn鈥檛 happened. Instead, the Third Circuit Court of Appeals the Federal Communications Commission to review and eliminate harmful broadcast ownership rules for the past seventeen years and counting.
Seventeen years ago, Netflix was only a few years removed from potentially being acquired by Blockbuster. It was a niche Internet business that delivered DVDs by mail. Original programming, let alone online streaming, was but a glimmer in co-founder Reed Hastings鈥� eyes.
How times have changed. Today, Netflix and other OTT players dominate the media landscape, both in eyeballs and relevance. Traditional media companies have tried admirably to compete in recent years, launching new services like Disney+ and so-called 鈥渟kinny bundles鈥� of linear online channels. Yet, their declining traditional cable and broadcast TV businesses are still some of the most heavily regulated industries in America.
The FCC doesn鈥檛 want it to be this way. But thanks to the Third Circuit鈥檚 refusal to allow it to do its job, the FCC is forced to retain these obsolete regulations on an ever-shrinking remnant of the past. The FCC recently of the Third Circuit鈥檚 intransigence. For the sake of media consumers everywhere, let鈥檚 hope the courts get it right this time.
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