From the outside, Netflix and TikTok may not look like competitors, but they are.
One is consumed on the big screen, the other on small. One is long, the other short. One consumes billions of dollars in capital to create content, the other gets millions of hours of programming virtually for free. One is paid, the other free and ad-supported.
“You’re really trying to capture eyeballs, and eyeballs can only be in so many places, can’t you?” says Data.ai CEO Ted Krantz.
Of course, it’s not just Netflix versus TikTok. On the one hand, it’s all OTT and streaming, with Disney+ and HBO Max, Apple TV+ and Peacock, Hulu, Amazon Prime and dozens more. And on the other are Reels from Facebook/Meta, Shorts from YouTube, Triller, Likee, Snapchat, and more. But despite its recent fall from can’t-miss kid status as our post-pandemic inflationary era has caught up with Netflix, it’s still the streaming giant with more customers than any other OTT service. And TikTok, which just got the most profitable quarter of any app with $840 million in in-app revenue, is clearly now the most massive player in video/social/entertainment apps despite YouTube and Meta’s best efforts.
“The big silver screen is disappearing, not to mention the big plasma screen at home and your surround sound system, isn’t it?” Krantz told me this recently on the TechFirst podcast. “Everyone, especially Gen Z, spends time on the mobile device consuming content.”
Next to games, OTT/streaming is the largest category in terms of consumer spending on mobile, Data.ai shares a recent report. So scheduled viewing isn’t going away entirely, and Netflix and company aren’t just for the big screen on the wall.
The challenge is that their business model – expensive content for paying customers – is much more capital intensive than that of TikTok, Meta or Snapchat while relying on a more limited collection than established players like Disney or HBO. Moving to an ad-supported model, which Netflix is committed to, will take time and focus, and could harm the product that won them over more than 220 million paying customers.
OTT still has three times consumer spending, according to Data.ai, compared to short video apps.
But that’s not true for all segments, Krantz says.
“Gen Z [is] spending about three times more in short video than in OTT,” says Krantz. “It’s a really interesting trend… Can TikTok move into other categories with this very loyal base and then start trying to increase monetization more online with the bigger subscription games that are on OTT ?”
In the end, the game is bigger and the cake is bigger.
Because there’s another huge category that also sucks up time and revenue: games. And which is growing in video, concerts and social categories.
“To make things even more complicated, there is a third player here,” says Krantz. “It’s the base that we’re not talking about today, which is gaming, which is still the biggest category. And they’re moving into media and entertainment… so it’s like a WWE match.
That’s probably one of the reasons why Netflix announced its expansion into the game a year ago, which is available in 190 countries around the world. And this is one of the causes of the merging of formerly distinct categories in sometimes unpredictable and chaotic ways.
Ultimately, who wins will be determined by changing attitudes toward entertainment. What we do know is that people are spending more time playing games and using their phones while watch less movies and TV shows. And it’s not new: it’s been a trend since basically a decade.
Yet while teens may not be watching on the big screen, many are spending huge chunks of time watching YouTuber in sometimes lengthy shows.
This is precisely why gamers seem to be converging: TikTok allowing longer videos, YouTube doubling down on Shorts, and Netflix looking for options for other ways to occupy attention. Not to mention Spotify entering videos with video podcasts, or Meta/Facebook attempting to shift the whole conversation – and consumption model – to VR and AR in the metaverse.
The next decade promises to be interesting.