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How Netflix's Competitors Can Get Off to a Strong Start

By Adam Levy - Mar 12, 2020 at 9:34AM

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Spending on marketing consumers will never see.

Consumers have more choices than ever when it comes to subscription video on demand, and they're about to get even more. Disney (DIS 1.84%) and Apple (AAPL 1.62%) introduced new streaming services late last year. AT&T (T 1.67%), Comcast (CMCSA 2.68%), and venture-backed Quibi are launching over the next few months. And the market for original content is more competitive than ever.

One of the most effective ways for new competitors to stand out and win new subscribers is to garner more award nominations and victories. Netflix (NFLX 2.90%) was very aggressive in winning Emmy and other award nominations when it first started producing original series. In 2018, it stepped up its marketing spend with a clear angle at getting more attention from awards academies. 

Netflix has seen a lot of success winning awards with its original series. (It's now trying to do the same with its films.) Parks Associates says the attention and prestige has bolstered the company with better subscriber retention. But winning awards for originals may have an even bigger impact on Netflix's new competitors.

Still from The Morning Show displayed on a TV, laptop, tablet, and smartphone.

The Morning Show. Image source: Apple

Standout performance

Consumers often look to experts to determine what's worth their time and money. To that end, an award-winning series or film might draw extra attention and drive subscriptions. "Awards recognition brings legitimacy to the original content in a streaming service and can be a significant boost especially in the early days after its launch," Parks Associates Research Director Steve Nason said.

He highlights the early success of Apple, which won awards from the Screen Actors Guild and Critics' Choice Awards for The Morning Show. Apple reportedly had 33.6 million Apple TV+ subscribers as of January. That's more than the official numbers from Disney+, but it's also worth noting nearly all of those Apple TV+ subscribers are on a yearlong free trial.

Apple will need to transition those viewers into paid subscribers starting later this year. Doing so may mean garnering more attention from critics for its originals. So far, many of Apple's originals have fallen flat. It's since hired former HBO chief Richard Plepler and hopes his track record is indicative of future results.

As for Disney, it fully capitalized on the viral success of "Baby Yoda" in The Mandalorian. In order to maintain its momentum, however, it'll need another hit series or two or to grab the attention of critics and fans. It'll debut two Marvel series later this year.

Meanwhile, HBO Max and Comcast's Peacock will feature their own originals. HBO Max may be able to capitalize on HBO's historical success and translate that into a bounty of award-nominated series. Peacock's original content investments will be relatively modest, and its marketing budget may not be enough to court the consideration of critics for awards. It's planning to spend just $2 billion over the first two years of the service -- far less than its competition.

A riskier marketing strategy

Winning awards might bring big benefits like more subscribers and attention from other creators, but it also comes with risks. Media companies may plow millions into "for your consideration" campaigns and see nothing from it. 

Even if a company can manage to win quite a few nominations, it's no guarantee to take home top prize. Netflix managed just two Oscars this year despite a whopping 24 nominations.

Netflix produces dozens of original titles every year and it's spending a lot of money to win awards. The odds for smaller competitors with just a few original titles and smaller marketing budgets aren't nearly as good. That's going to make winning a prestigious award a much riskier strategy for a company like Apple than Netflix.

The good news for most of Netflix's start-up competitors is that they're all part of much larger businesses that can afford to take big risks if the potential payoff is good enough. With the amount of focus Disney, Comcast, AT&T, and even Apple are putting on their streaming services, the competition during awards season should be quite heated.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
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AT&T Inc. Stock Quote
AT&T Inc.
T
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The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
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Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$179.95 (2.90%) $5.08
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
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