Written by Helen Hejran

In 2013, the Netflix original House of Cards won the streaming service’s first Emmy. In 2019, a Motion Picture Association of America report concluded that streaming services overtook cable in subscriptions between 2017 and 2018. Streaming services have won the battle over the box, and the streaming war is in full gear. Netflix, HBO Max, and Disney+ have taken differing approaches to capturing a competitive advantage to be the top streaming service users turn to.

As shown in Figure 1, the landscape of streaming services over the last 15 years has markedly shifted. Netflix was one of the original streaming services to take off after starting out as a rent-by-mail DVD service. In the past five years, Hulu lowered the price of its base ad-supported subscription plan, Disney+ launched in 2019 and reached 100 million subscribers, and Warner Bros. rebranded and relaunched its subscription services in 2020 from HBO Now to HBO Max.

Pricing

Even with Netflix’s price hikes over the past six years, HBO Max is still the most expensive subscription service. HBO Max’s subscription rate is $14.99. This will be changing as HBO Max adds a lower ad-based subscription tier, but it is currently known as the expensive content provider. Netflix has been catching up and increased its subscription price from $8 in 2015 to the current $14 in 2021. Disney+ launched at $6.99 and this year will increase to $7.99 (see Figure 2).

Subscription Growth: Netflix and Disney+ Coming Out on Top

After a stellar first half of 2020, Netflix concluded the year with nearly 204 million subscribers worldwide. This impressive number shows the strength of Netflix’s original programming as well as the effects of the Covid-19 lockdowns. The great growth seen in 2020 can be attributed to several factors. First, there was growth due to an increase in international subscribers. Second, the competition in 2020 was lower than what Netflix faces in 2021. While Netflix’s growth is positive, by October 2020, a Deloitte study reported that a quarter of subscribers had canceled a service to sign up for a different one. This 25% is an increase from the 17% from May 2020. Between May and October 2020, HBO Max and Peacock were launched, with Peacock having a free, ad-based subscription tier open to everyone. At the start of 2021, CBS All Access was relaunched as Paramount+. These additions along with other smaller subscription service additions have made the field more crowded even when comparing to the beginning of 2020.

Of the newer streaming services, Disney+ leads with hitting 100 million subscribers in less than two years. Comparatively, HBO Max’s subscription numbers are more complicated. HBO Max has a unique problem in that not all of its 41 million subscribers have activated their subscriptions, a result of HBO’s 37.7 million cable subscribers receiving a free HBO Max add on. Furthermore, HBO Max will join Peacock among other streaming services and offer an ad-supported subscription tier beginning in June 2021. Its ad-supported tier won't allow access to its day-and-date theatrical releases. Interestingly though, ads won't be played on HBO originals such as Game of Thrones and The Sopranos.

Content, Licensing, and IP

The rise in the streaming wars stems in largely from major corporations turning to vertical integration and developing their own streaming platforms. Netflix needs to continue to churn out high-quality content despite the loss of great content to their new streaming competitors. In January 2021, Netflix announced that it would release at least one film a week.

As many competitor companies have built competing services, Sony Pictures took a different route and sealed a licensing deal in April 2021 with Netflix on its feature films. The negotiated deal will provide Netflix a great source for direct-to-streaming films as well as theatrically released films. While companies like Disney, WarnerMedia, and NBCUniversal have pulled out their best content to put onto their own streaming platforms, Sony Pictures will help boost Netflix’s library with upcoming films such as Morbius and Where the Crawdads Sing. For films that will go direct to streaming platforms, Netflix has been granted the first right of refusal.

For HBO Max, its lack of public awareness and brand identity may have kept it from reaching its upmost growth potential. While HBO’s cable channel has a distinct brand of high-caliber series, HBO Max isn’t meant to be tied to HBO but rather all WarnerMedia content. Unfortunately, with the name HBO Max, this fact may not be obvious to all potential subscribers. HBO Max has a wide array of content in its library coming from Warner Brothers, Cartoon Network, HBO, and even half of The CW. The strong overlap seen in HBO Max’s subscriber pool and HBO’s cable channel subscribers may reflect that its diverse library has not been made clear to would-be subscribers.

HBO Max has also taken an interesting approach in how it has used its major IP. Its big reboot announcements of existing IP entailed one-off specials. While Disney+ and Peacock have utilized their IP to launch revival series or films, HBO Max has had several reunion specials. For example, there was The West Wing special live-reading of an old episode and the recently filmed Friends reunion special (see Figure 3). In comparison, Disney+ announced over 60 upcoming shows with almost all of them based on its existing IP. It had ten shows based on its Star Wars IP alone. It had another dozen shows based on its Marvel Cinematic Universe IP.

Disney+ in particular has latched onto and perfected the tactic of relying on existing IP to develop the majority of its original content. Rather than convince potential subscribers that they will love a new show, Disney created the The Mandalorian. It doesn’t have to convince users to try it out to see if they’ll love it—it knew it was targeting the already massive Star Wars fanbase.

The use of popular existing IP is a straightforward strategy these major corporations can lean into that Netflix—without the history—simply cannot try to fight.

Experiments with Streaming

It is well established and part of the business model of Netflix to ignore theatrical releases unless it is trying to qualify for award ceremonies like the Oscars. Netflix original movies are watched on Netflix and nowhere else. However, streaming services like Disney+ and HBO Max have to consider the other arms of their parent corporations, and releasing films in theaters has been part of that for over a century. Throughout the Covid-19 pandemic, both Disney+ and HBO Max have used the lockdowns and restrictions to push to gain subscribers and try to claim their stake as the big competitor against Netflix. They have used the pandemic to switch the tracks of many of their films that would normally go to theatrical releases first and have them go straight to their new streaming services instead. The subscription services have approached this experimentation of the “Netflix model” in different ways.

WarnerMedia announced that all their 2021 films would be day-and-date releases, meaning that users would be able to choose whether to watch the films in theaters or on HBO Max.

Interestingly, they reached a 45-day exclusive theatrical window with Regal for their 2022 movie slate, ending the day-and-date. When HBO Max began to move their films straight to streaming due to the pandemic, one issue was the quality. HBO Max content only went up to 1080p until the release of Wonder Woman 1984. The release on HBO Max was the first 4K content for the subscription service, which also made Wonder Woman 1984 available with Dolby Vision, Dolby Atmos, and HDR10. After committing to day-and-date for 2021, HBO Max has shown its flexibility to the changing environment yet again by switching back to exclusive theatrical windows. While Wonder Woman 1984 helped them gain more subscribers, each blockbuster film would have to singlehandedly capture millions of viewers in order to make up for the potential earnings of a theatrical release.

In comparison, the Disney+ model added an extra layer of Premier Access. While some films went straight to Disney+ with no paywall, some films like Mulan and Raya and the Last Dragon were put behind an additional paywall of $29.99. This was Disney’s way of having almost a “group ticket” where they could make up the lost money from theater tickets by charging their subscribers a second fee in additional to the monthly subscription fee if they don’t want to wait to watch it.

Ultimately, neither corporation wants to fully sever ties with the lucrative money that they make through their theatrical releases. With their much more complex myriad of subsidiary companies, neither HBO Max nor Disney+ will go the way of Netflix to release all their films onto their streaming platform.

Different Approaches in Password Sharing

Netflix CEO Reed Hastings in 2016 acknowledged that there is "so much legitimate password sharing — like you sharing with your spouse, with your kids … so there’s no bright line, and we’re doing fine as is."

In 2021, Netflix will be starting to implement a crackdown on their password sharing. This will involve verification codes through email or texts where you have to input the code within a certain timeframe. This is not novel technology. This type of security is common for verifying devices in online banking and other high security risk accounts. This type of regulation isn’t even new to the streaming world. Users who watch Amazon Prime Video need to sign onto their Amazon Prime account first, which requires new sign-in verification by sending a time-sensitive code to the primary account holder’s phone and email. While it is not new, it is still unclear how stringent Netflix will be in password sharing and if other checks will be utilized.

Michael Paull, President of Disney Streaming Services stated, "We have created some technology that’s in the backend that we will use to understand behavior. And when we see behavior that doesn’t make sense, we have mechanisms that we’ve put in place that will deal with it.”

Unlike Netflix, Disney+ starts with a base of seven profiles and allows up to 10 devices to download content for offline viewing. Furthermore, Disney+ permits up to four simultaneous devices to be streaming at a single time. In comparison, that is the maximum number Netflix allows—and only under their most expensive plan. Netflix permits up to five profiles on one Netflix account.

HBO Max is also permitting up to five profiles on one account. Interestingly, they never allowed more than one on the HBO Max predecessor HBO Now. When it comes to simultaneous device streaming, HBO Max caps it at three devices.

Focusing on Strengths and Target Market

Netflix is doing exactly what it should be doing: it is continuing to focus on its original content while also reaching out to make partnership deals with production companies not fighting in the streaming wars.

HBO Max needs to further highlight its incredible library and make more of their popular existing IP. Not only can subscribers find Friends, The Big Bang Theory, and The Fresh Prince of Bel Air, but also they can enjoy Studio Ghibli and the entire HBO original content. This versatility of different shows and movies that fall under the HBO umbrella make HBO Max more similar to Netflix than it is to Disney+. If HBO Max can work on developing the awareness of their wide library, this can work in its favor to increase subscribers.

Disney has also been doing a great job by focusing on all of its exclusive and incredibly popular IP that audiences already love. By creating original content with this IP, it is continuing to generate more attraction to continue to surprise Disney+ subscribers. Furthermore, it is also being smart in releasing its shows week by week in order to prevent subscribers from bingeing in a single weekend and then canceling.