The relevance of media-streaming startups

With 86 million users across multiple countries and roughly $2.2 billion in generated revenue in Q3 2016, Netflix is the shining star of media-streaming startups. But it wasn’t always such a powerhouse.

In the early days of Netflix, video rental companies like Blockbuster were the established opposition. Old media and distribution channels kept a watchful eye on the media-streaming newcomer, but felt no reason to be concerned.

That changed in 2002, when — just five years after it was founded — Netflix went public. It has been a hit ever since. Blockbuster, on the other hand, was absorbed by DISH in 2011 after filing for bankruptcy, leaving just a handful of franchise stores operating throughout the United States.

Times have changed, but ongoing public demand for innovative new access to entertainment hasn’t. Internet access and social networks have given consumers more options. Consumers, in turn, have started to play a bigger role in shaping the market. But now that we’re at a point where the entertainment and media (E&M) market is saturated with streaming offerings, the next logical questions to ask are: Where do we go from here? Is there still a place for media-streaming startups?

Old media and new media: friends or frenemies?

The short answer is… yes. The E&M industry is going through a lot of flux, and traditional pay-TV subscriptions are falling — one PwC survey from the fall of 2015 noted that only 56 percent of viewers are maintaining TV subscriptions. In comparison, 23 percent are scaling back pay-TV packages, 16 percent have unsubscribed and 5 percent have never had a pay-TV subscription at all. Just two years ago, more than 90 percent of American consumers said they expected to renew their cable packages for another year, but that number fell to 79 percent in 2015.

And as those subscriptions continue to drop, both networks and TV providers are looking to streaming technology to make up for the losses.

We’re now living in a direct-to-consumer environment, and media operators are trying to figure out what that means. Consumers are embracing the world of streaming, with new devices hitting the market every year. This push for easy access has led a lot of brands — including Verizon, NBC, Time Warner, Comcast and several others — to put money into startups, according to recent CB Insights data.

Realistically, those big corporate buy-ins are greatly needed in the startup world. According to Kirk Parsons, a senior director at J.D. Power, “The streaming video customer experience appears to be stratifying across the different subscriber segments, with pay-TV service still having a major effect on the overall streaming video experience,” meaning pay-TV giants still hold a lot of sway in the market.

That’s actually good news for the young over-the-top (OTT) media-streaming companies and others in this space that are in need of old-media money and exposure. It’s a win-win: Startups get funding, and established providers can invest in technologies and platforms that could help preserve their consumer bases.

Can media-streaming startups survive independently?

Talking about startup survival is one thing — but independent survival is another. There are plenty of examples of streaming startups that thrive well enough to get picked up by other networks or providers. Just this year, AT&T acquired Quickplay Media, a video-streaming startup, to strengthen its current and planned streaming offerings. But there are far fewer examples of streaming startups that have survived independently. It would take a streaming startup years to establish an audience comparable to any of the legacy media brands.

An OTT streaming startup doesn’t just need exposure if it wants to survive without acquisition, either — it also has to find a way to do something that Netflix, Amazon, Hulu and dozens of other legacy media players aren’t already doing. Gaining significant traction is far more difficult in an established ecosystem without a significant technical iteration. Startups and mainstream media are stronger together, better able to create and distribute content, acquire users and gain a clear understanding of their needs as consumers and fans.

So when we look at whether there’s still a place for media-streaming startups, the answer is complex — given current market saturation, new media-streaming startups may have a hard time differentiating themselves enough to keep up without some kind of bigger corporate buy-in. But if a streaming startup can find a need to meet, and if it can meet those needs better than any companies already out there, survival is possible.

There will always be room, in this customer-centered industry, for smart startups to push the envelope — with or without the blessing of its bigger media-industry peers.