Netflix's (NFLX) position in the new landscape of cord cutting raises one key question: Is there enough demand to sustain so many players?
The company is feeling the weight of encroaching competition from the likes of Disney (DIS) , AT&T (T) , Amazon (AMZN) , and others as well as potential aggregation aims of Apple (AAPL) , adding to the stock's decline provoked by sliding subscriber numbers in its latest earnings report.
CEO Reed Hastings has remained confident that the company can indeed produce content capable of keeping subscribers aboard.
"There's a real battle for who will pay for content around the world," he acknowledged. "But it's not a zero-sum competition. I think everybody gets that. People will subscribe to multiple shows."
He added that, overall, the increased competition in streaming foments momentum toward OTT watching in the general public.
"It's a great competition that it helps grow the industry and the advantage of having something catchy like the 'streaming wars' is it draws more attention, and because of that, people, consumers, shift more quickly from linear TV to the streaming TV," Hastings commented.
Still, the question isn't so much whether people will adopt numerous services. Instead, it appears to be about how many, at what cost and, maybe most importantly, which services they will choose to support.
The first question if streaming is not a zero sum game is about how much pie there really is.
Consumers can indeed become fatigued by a cavalcade of options for streaming to pay for individually. Essentially, cable companies were a key way to allow consumers to get big bundles of content without having to individually pay for each channel. As these services proliferate, there is increased debate about subscriptions.
Without this type of system yet agreed to by any of the major players in streaming, consumers are left with difficult choices on which content to pony up for.
With Disney's Hulu and upcoming Disney+, AT&T's HBO, and Amazon Prime streaming the largest threats to Netflix's pole position, one must wonder if consumers would pay for all of them.
According to UBS research, the short answer is "no".
"Only 13% of respondents were willing to pay for more than 3 online video services," a recent analysis notes. "Younger demos and higher income households were generally more willing to have multiple services, but the sweet spot remained 2-3 services."
Among older demographics, the numbers are even more lopsided with only 72% of those 55 and over willing to pay for no more than one service. As this demographic still controls a lion's share of wealth in the nationm, according to Deloitte, the metric is startling.
It doesn't necessarily mean it's a "zero sum game" as Hastings points out, but it does mean there is likely not enough room for each company investing in the trend to succeed now.
As far as total spend, the metrics are also worrisome for Netflix in particular, as its capital intensive plan for content production puts it under significant pressure to hike costs to consumers and risk being undercut by peers with backlogs of movies that do not necessitate such a rapid spend.
"With consumers assembling their own bundles, respondents were also asked how much they are willing to pay for ALL video content they subscribe to. Counter to current practice, most respondents (~60%) indicated they would be unwilling to pay more than $50 per month, well below average traditional video ARPU of $90 in the U.S. today," the UBS report reads.
Perhaps Netflix was wise to raise prices when it did, as it is likely to only become more difficult in the coming years.
Hastings has pushed back on the pricing power argument, noting that the lack of commercials on both Netflix and HBO are key differentiators that should allow both to keep consumer interest enough to encourage them to open their wallets.
"We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction," the company said in a statement.
Still, with the amount of options now available the simple truth is that while there might not be one overall winner, the pie is not big enough to feed each entrant into the streaming space.
"We believe the survey results suggest consumers are only willing to pay for a few video services and could look to drop existing subscriptions when new services come to market (and/or rotate services seasonally based on content slates)," the UBS team surmised. "This would result in only a handful of winners in the OTT video space and an even larger number of losers over time."