In 2001 I was bitterly disappointed by the failure of the Dreamcast – a console I’d only owned for about a year and had hoped would carry me through to the next generation of home consoles. For a variety of reasons that essentially boil down to mismanagement, worse-than-expected sales, and some pretty tough competition, Sega found itself on the verge of bankruptcy. The company responded not only by ending development on the Dreamcast, but by closing its hardware division altogether.
At the time, Sega seemed to be at the pinnacle of the games industry. For much of the 1990s, the company had been a dominant force in home video game consoles alongside Nintendo, and as the new millennium approached there were few outward signs of that changing. It was a massive shock to see Sega collapse in such spectacular fashion in 2001, not only to me but to millions of players and games industry watchers around the world.
Thinking about what happened from a business perspective, a demise like this was inevitable in the early 2000s. Both Sony and Microsoft were arriving in the home console market with powerful machines offering features like the ability to play DVDs – something that the Dreamcast couldn’t do – but at a fundamental level the market was simply overcrowded. There just wasn’t room for four competing home consoles. At least one was destined for the chopping block – and unfortunately for Sega, it was their machine that wouldn’t survive.
But the rapid demise of the Dreamcast wasn’t the end of Sega – not by a long shot. The company switched its focus from making hardware to simply making games, and over the next few years re-established itself with a new identity as a developer and publisher. In the twenty years since the Dreamcast failed, Sega has published a number of successful titles, snapped up several successful development studios – such as Creative Assembly, Relic Entertainment, and Amplitude Studios – and has even teamed up with old rival Nintendo on a number of occasions!
I can’t properly express how profoundly odd it was to first see Super Mario and Sega’s mascot Sonic the Hedgehog together in the same game! The old rivalry from the ’90s would’ve made something like that impossible – yet it became possible because Sega recognised its limitations and changed its way of doing business. The board abandoned a longstanding business model because it was leading the company to ruin, and even though it does feel strange to see fan-favourite Sega characters crop up on the Nintendo Switch or even in PlayStation games, Sega’s willingness to change quite literally saved the company.
From a creative point of view, Sega’s move away from hardware opened up the company to many new possibilities. The company has been able to broaden its horizons, publishing different games on different systems, no longer bound to a single piece of hardware. Strategy games have been published for PC, party games on the Nintendo Wii and Switch, and a whole range of other titles on Xbox, PlayStation, handheld consoles, and even mobile. The company has been involved in the creation of a far broader range of titles than it ever had been before.
So how does all of this relate to streaming?
We’re very much in the grip of the “streaming wars” right now. Big platforms like Netflix, Amazon Prime Video, and Disney+ are battling for subscribers’ cash, but there’s a whole second tier of streaming platforms fighting amongst themselves for a chance to break into the upper echelons of the market. The likes of HBO Max, Paramount+, Apple TV+, Peacock, BritBox, and even YouTube Premium are all engaged in this scrap.
But the streaming market in 2021 is very much like the video game console market was in 2001: overcrowded. Not all of these second-tier platforms will survive – indeed, it’s possible that none of them will. Many of the companies who own and manage these lower-level streaming platforms are unwilling to share too many details about them, but we can make some reasonable estimates based on what data is available, and it isn’t good news. Some of these streaming platforms have simply never been profitable, and their owners are being propped up by other sources of income, pumping money into a loss-making streaming platform in the hopes that it’ll become profitable at some nebulous future date.
To continue the analogy, the likes of Paramount+ are modern-day Dreamcasts in a market where Netflix, Amazon, and Disney+ are already the Nintendo, Xbox, and PlayStation. Breaking into the top tier of the streaming market realistically means one of the big three needs to be dethroned, and while that isn’t impossible, it doesn’t seem likely in the short-to-medium term at least.
Why did streaming appeal to viewers in the first place? That question is fundamental to understanding why launching a new platform is so incredibly difficult, and it’s one that too many corporate executives seem not to have considered. They make the incredibly basic mistake of assuming that streaming is a question of convenience; that folks wanted to watch shows on their own schedule rather than at a set time on a set channel. That isn’t what attracted most people to streaming.
Convenience has been available to viewers since the late 1970s. Betamax and VHS allowed folks to record television programmes and watch them later more than forty years ago, as well as to purchase films and even whole seasons of television shows to watch “on demand.” DVD box sets kicked this into a higher gear in the early-mid 2000s. Speaking for myself, I owned a number of episodes of Star Trek: The Next Generation on VHS in the 1990s, and later bought the entire series on DVD. I had more than enough DVDs by the mid-2000s that I’d never need to sign up for any streaming platform ever – I could watch a DVD every day of the year and never run out of different things to watch!
To get back on topic, what attracted people to streaming was the low cost. A cable or satellite subscription is easily four or five times the price of Netflix, so cutting the cord and going digital was a new way for many people to save money in the early 2010s. As more broadcasters and film studios began licensing their content to Netflix, the value of the deal got better and better, and the value of cable or satellite seemed ever worse in comparison.
But in 2021, in order to watch even just a handful of the most popular television shows, people are once again being forced to spend cable or satellite-scale money. Just sticking to sci-fi and fantasy, three of the biggest shows in recent years have been The Mandalorian, The Expanse, and The Witcher. To watch all three shows, folks would need to sign up for three different streaming platforms – which would cost a total of £25.97 per month in the UK; approximately $36 in the United States.
The overabundance of streaming platforms is actually eroding the streaming platform model, making it unaffordable for far too many people. We have a great recent example of this: the mess last week which embroiled Star Trek: Discovery. When ViacomCBS cancelled their contract with Netflix, Discovery’s fourth season was to be unavailable outside of North America. Star Trek fans revolted, promising to boycott Paramount+ if and when the streaming platform arrived in their region. The damage done by the Discovery Season 4 debacle pushed many viewers back into the waiting arms of the only real competitor and the biggest danger to all streaming platforms: piracy.
The streaming market does not exist in a vacuum, with platforms jostling for position solely against one another. It exists in a much bigger digital environment, one which includes piracy. It’s incredibly easy to either stream or download any television episode or any film, even with incredibly limited technological know-how, and that has always represented a major threat to the viability of streaming platforms. Though there are ethical concerns, such as the need for artists and creators to get paid for their creations, that isn’t the issue. You can shout at me until you’re blue in the face that people shouldn’t pirate a film or television show – and in the vast majority of cases I’ll agree wholeheartedly. The issue isn’t that people should or shouldn’t engage in piracy – the issue is that people are engaged in piracy, and there really isn’t a practical or viable method of stopping them – at least, no such method has been invented thus far.
As more and more streaming platforms try to make a go of it in an already-overcrowded market, more and more viewers are drifting back to piracy. 2020 was a bit of an outlier in some respects due to lockdowns, but it was also the biggest year on record for film and television piracy. 2021 may well eclipse 2020’s stats and prove to have been bigger still.
Part of the driving force is that people are simply unwilling to sign up to a streaming platform to watch one or two shows. One of the original appeals of a service like Netflix was that there was a huge range of content all in one place – whether you wanted a documentary, an Oscar-winning film, or an obscure television show from the 1980s, Netflix had you covered. Now, more and more companies are pulling their content and trying to build their own platforms around that content – and many viewers either can’t or won’t pay for it.
Some companies are trying to push streaming platforms that aren’t commercially viable and will never be commercially viable. Those companies need to take a look at Sega and the Dreamcast, and instead of trying to chase the Netflix model ten years too late and with far too little original content, follow the Sega model instead. Drop the hardware and focus on the software – or in this case, drop the platform and focus on making shows.
The Star Trek franchise offers an interesting example of how this can work. Star Trek: Discovery was originally available on Netflix outside of the United States. But Star Trek: Picard and Star Trek: Lower Decks went to Amazon Prime Video instead – showing how this model of creating a television show and selling it either to the highest bidder or to whichever platform seems like the best fit for the genre can and does work.
Moves like this feel inevitable for several of these second-tier streaming platforms. There’s a hard ceiling on the amount of money folks are willing to spend, so unless streaming platforms can find a way to cut costs and become more competitively priced, the only possible outcome by the end of the “streaming wars” will be the permanent closure of several of these platforms. Companies running these platforms should consider other options, because blindly chasing the streaming model will lead to financial ruin. Sega had the foresight in 2001 to jump out of an overcrowded market and abandon a failing business model. In the two decades since the company has refocused its efforts and found renewed success. This represents a great model for streaming platforms to follow.
All films, television series, and video games mentioned above are the copyright of their respective owner, studio, developer, broadcaster, publisher, distributor, etc. This article contains the thoughts and opinions of one person only and is not intended to cause any offence.