Evidence emerges from AMC+ and Shudder, and Netflix’s animation strategy, on how product channel fit makes the “streaming wars” more like “genre wars”

parqor shudder

Last week, I wrote about Why the “Streaming Wars” Are Actually About Product Channel Fit. In that piece I concluded:

…there is no competition here between these platforms, channels, shows, and niche content. This is not a ranking of competitors. Rather, this is a list , if not an array, of shows that are succeeding unusually well within their particular distribution channels.

These are shows that have found unusual success with channel-market fit (about which I wrote two weeks ago on Roku). That has certainly been the case with Cobra Kai – it was successful on YouTube, but it did not help YouTube Premium grow, and now it has been extraordinarily successful on Netflix (see chart above).

So, the data we are getting on “the streaming wars” are not about war or zero-sum; rather, I would argue they are about which companies are savvy enough to understand the marketing required to drive scale in those channels where it finds product-channel fit. Rankings like the chart above tell us which ones are figuring that out, and how well they are succeeding with product-channel fit, nothing more.

Netflix continues to win the game because it has solved for near-ubiquitous product-channel fit. No one else is coming close to its model, or its marketing economics.

I want to build out on this point a little.

A quote in a piece about Shudder and AMC+ today and a quote in a piece about Ted Sarandos’ animation ambitions for Netflix help to flesh out this argument on product channel fit in some interesting ways. In short, one way to think about product channel fit in streaming is to think of the “streaming wars” more as ‘the genre wars”, which are more like focused, zero-sum conflicts around specific content genres than broader head-to-head, zero-sum conflicts between platforms for the same audience.

Shudder & AMC+

This quote struck me in Scott Porch’s piece in Decider on a promising future for AMC+ and Shudder:

“Shudder competes incredibly well on its own against Netflix and Hulu for horror,” says Craig Engler, Shudder’s general manager. “If you only want to watch one or two horror movies, you’ll probably be happy with Netflix or Hulu. If you want a service with a broad and deep horror selection, you come to Shudder.”

A subscription to Shudder costs $5.99 per month or is included with AMC+ for “$1-$3 more a month depending on the platform”.  Engler later adds:

“You pay a little bit more money, and you get a range of services. Shudder is the service you get if you want just horror, thriller and supernatural; AMC+ gives you more of the great content throughout AMC.

Applying the lens of product channel fit to these quotes, three important points pop out. First, Shudder is finding success with its focus horror year-round, and notably in October despite The Haunting of Bly Manor and Hubie Halloween being the number one show and number one movie on Netflix. Meaning, there are genres where the big streamers are simply willing to concede defeat except for the month where horror matters to broader audiences. For the rest of the year, horror is Shudder’s to own.

Second, AMC+ is interesting because it is a portfolio approach to packaging popular shows from different genres. Unlike BET+ (1MM subs for Tyler Perry content) or Crunchyroll (3MM+ subs for anime), AMC+ understands there are niche audiences for a particular genre who also like content from other genres. AMC Network’s success with two distinctly different genres The Walking Dead and Mad Men is proof of that. On AMC+, audiences can consume both shows, and be exposed to additional shows from AMC, Sundance, IFC, and BBC America.

As Scott Porch writes,

Particularly for a company much smaller than rivals Netflix and Disney, AMC Networks is better positioned for a breakout horror hit like Spiral, whose trailer racked up 2.5 million views in its first six weeks on YouTube. Gangs of London on AMC+ is already getting more critical attention — including a “Stream It” rating from Decider — than it would have received on a niche service like BritBox or AMC’s Sundance Now.

By focusing on specific genres, and aggregating them together in a service that both has a clear value proposition and is cheaper than cable, AMC+ can find wins year-round in the genres that Netflix, Disney+, and Amazon Prime Video simply are not focused on year-round.

Third, AMC+ is finding product channel fit via Apple TV and Prime Video Channels. As Scott writes,

Apple TV and Prime Video, which both began offering AMC+ for $9 a month at the beginning of October, have given the service almost universal distribution. The Prime Video app is available on essentially every platform, and the Apple TV app is available on Roku, Samsung, LG, VIZIO, Amazon’s Fire TV, and launching this week on Sony TVs.

Apple TV and Prime Video also integrate AMC+ into your viewing experience the more you watch — dedicated content rows, recommendations based on your viewing, etc. — and allow you to start viewing a movie or TV episode on the Apple TV or Prime Video app on one device and continue later on another device.

Even if there are no “streaming wars”, AMC+ is evidence that streaming services are engaging in “genre wars”, and AMC+ is finding both scale and product channel fit with the help of third party distributors Apple and Amazon.

Netflix & Animation

I had not thought of Netflix engaging in “genre wars” until I read this eyebrow-raiser of a quote from Netflix co-CEO Reed Hastings:

“We want to beat Disney in family animation,” says Hastings when asked what area of programming he felt that the streaming giant, which releases hundreds of titles around the world each year, has yet to master. “That’s going to take a while. I mean, they are really good at it.”

Add to that Hastings told The New York Times when asked which writers are “especially good on the workings of the entertainment industry”, he answered Neal Gabler (biographer of Walt Disney) “for historical perspective”, and Disney Chairman Bob Iger “for the inside view”. Hastings very much has his eyes on the animation prize.

Co-CEO Ted Sarandos shed some additional light on Netflix’s ambitions in animation to Variety:

“Our animation ambition right now is not just to step up and be as big as someone who’s doing it today — we’re on a path to be releasing six animated features a year, which no major studio has ever done, on top of the very healthy slate of animated series,” says Sarandos. “The way we think about those things is not to say, ‘Well, how do we do it like someone else has done it?’ Because no one’s ever really done most of these functions at the scale that we’re doing, and the only way you could do that is to have a really trusted team, who will make decisions and take them seriously and own them.”

The Hastings quote tells us that Netflix is launching a “genre war” against Disney in animation, and plans to leverage both its enormous global scale (150MM+ subscribers) and ubiquity to “win” the family animation genre from Disney in streaming. If it were launching a “streaming war”, we would see efforts to topple Marvel IP and Star Wars IP, but we are not.

Netflix has a built-in economic advantage in its marketing ubiquity, too, as I observed last week:

Last quarter, it cost $2.25 per subscriber (193MM subscribers worldwide, and $434MM in spend) for the ubiquity model. That’s super-cost effective.

Neither Disney nor Amazon Prime Video is anywhere near where Netflix is in terms of ubiquity. We know Disney spent an estimated $210 million on Facebook ads for Disney+ in the U.S., alone, in the first half of 2020. But, if U.S. users for Disney+ total 40MM (NOTE: my estimate), that means Disney spent 2x Netflix’s marketing average on Facebook, alone. This implies inefficiency where Netflix continues to find efficiencies.

Meaning, Netflix will be more cost-effectively able to generate scale for each of its six animation features over the next year than Disney will be able to market its tentpole animation releases on Disney+ like Pixar’s Soul, which will be coming out around Christmas.

Netflix is not trying to defeat Disney+, but it does smell weakness in Disney’s model that make Netflix’s extraordinary scale and favorable marketing economics unusual advantages if Netflix seeks to topple Disney in a “genre war” over animation.

Conclusion

I increasingly enjoy and use this “product channel fit” lens because it teases out more of the business logic of streaming services than the catchy but wrong term “The streaming wars”. The term “war” implies head-to-head combat in a zero-sum game, and that is playing out, but much more narrowly. Streaming services are picking their battles genre by genre. In turn, the evidence we see are seeing about services competing is more around genre than it is within the business of streaming.

Shudder on and with AMC+, and animation on Netflix, are examples of genres which are succeeding unusually well within their particular distribution channels. Each are examples of streaming platforms having very precise objectives and strategies within specific genres. AMC is proving it can find product channel fit for horror, and is betting that AMC+ expands the customer base for product-channel fit. Netflix is betting that its ubiquitous product channel fit can scale animation well beyond Disney’s previous benchmarks for success. 

Looking ahead, the open question is what “winning” in each genre means for each service. Netflix is clearest on its objective – zero-sum wins over Disney. Shudder’s objectives are clear: it wants to be the horror destination. AMC+’s objectives are  less clear given that it is leveraging a portfolio approach to navigate the disruption to its cable business. Focusing narrowly on genres (horror, indie dramas) where Netflix, Amazon Prime, and others tend not to play year-round helps AMC+ to find wins.

The objectives are clear. How or even whether they will be accomplished will be at the product channel fit level.

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