Streaming television has been all the rage for media companies, and nearly every major studio now has its own streaming service. But the biggest winners over the past year haven't been Netflix (NFLX 1.84%) and Disney (DIS 0.20%), which have the biggest streaming services. 

ViacomCBS (PARA 1.67%), Discovery Communications (DISCA), and Lions Gate Entertainment (LGF-A) (LGF-B) have all beaten their larger rivals by a wide margin in the stock market. Will the trend continue or is it a brief tangent in the long-term story? 

A cloud connected to a TV.

Image source: Getty Images.

Beating the media giants

You can see below just how well Viacom, Discovery, and Lions Gate have done on the market over the past year. And while Disney and Netflix are up, they certainly haven't kept pace. 

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Why have they done so well while Disney and Netflix have lagged? The simple answer is that all three companies have launched or expanded a streaming-TV service that investors think could be a foundation on which to build. 

To put some numbers to the trend, Lions Gate's over-the-top streaming subscribers increased 70% in the most recent quarter to 14.6 million, Discovery's new service Discovery+ has now reached 11 million paying subscribers, and ViacomCBS had nearly 30 million streaming subscribers when it reported earnings just ahead of its launch of Paramount+. These are solid numbers, and investors are betting that the rise in streaming will make these growth stocks in the long term. But that thesis may be wrong, given media dynamics today. 

How the streaming giants could crush rivals

The media business today is about having the sheer scale to buy or build the best content, which keeps the conversation going and a streaming service running. And Netflix, with its 204 million subscribers, and Disney+, which recently crossed 100 million, have shown that they have the revenue to keep the content machine running. 

With significantly smaller user bases, Discovery, Lions Gate, and ViacomCBS simply don't have the revenue to bid for big producers like Shonda Rhimes or performers like Jerry Seinfeld and Dave Chappelle, like Netflix did. Disney went an equally expensive route with the multibillion-dollar acquisitions of Pixar, Marvel, and Lucasfilm, which now dominate Disney+. 

Scale is important in streaming because media today is about consumer access and buzz. If I asked, "Are you going to watch The Falcon and The Winter Soldier this weekend?" you are likely to at least know what I'm talking about given the hype that has gone into that Marvel show's release. You may have an opinion on WandaVision's recent run -- if you're one of 100 million Disney+ subscribers -- and you can participate in the conversation.

Now what if I asked, "Are you going to watch The Stand?", the first original listing on the Paramount+ website. It's far less likely you know the name, and the conversation simply ends -- unless it's so compelling that you want to subscribe to Paramount+ just to watch the show. 

The streaming media business is like a wheel. This conversation around shows like Orange Is the New Black, Stranger Things, and The Queen's Gambit keeps people interested in the streaming service, which drives subscriptions and the ability to create more content.

Netflix and Disney are going to have the financial strength to acquire or build those hit shows and the audience to build buzz for them. I have more doubts about whether smaller rivals will have the same reach. Like an indie movie studio, they may have hits, but breaking out into a larger market may be tough. 

How will streaming play out? 

Right now, the stock market is giving any company with dreams of building a large streaming service a lot of love. But I don't think that will continue. Bundles of hundreds of TV channels supported a lot of media companies under the cable TV model, but in streaming -- where customers are paying the content creators directly -- it will be harder to reach the same scale. That's why I think Disney and Netflix are still the best bets to be the long-term winners. 

What we could see is consolidation among the remaining streaming companies. It may make sense for some combination of Paramount+, Peacock, Lions Gate, and Discovery to pool their assets and studios to build a bigger rival to Netflix and Disney. I don't see a dozen streaming services surviving, so companies will want to be one of the top three or four, and with the top two spots pretty much sewn up, there could be a rush to capture the market that's left.