From the outside, Netflix and TikTok may not seem like competitors, but they are.
One is consumed on large screens, the other on small ones. One is long format, the other short. One consumes billions of dollars in capital to create content, the other gets millions of hours of programming virtually free. One is paid, the other free and with advertising.
“You’re really trying to capture eyeballs, and eyeballs can only be in so many places, right?” says Data.ai CEO Ted Krantz.
Of course, it’s not just about Netflix versus TikTok. For one thing, it’s all OTT and streaming, with Disney+ and HBO Max, Apple TV+ and Peacock, Hulu, Amazon Prime and many more. And on the other, Facebook/Meta Reels, YouTube Shorts, Triller, Likee, Snapchat and more. But despite its recent drop from must-see status as our post-pandemic inflationary times caught up with Netflix, it remains the streaming giant with more customers than any other OTT service. And TikTok, which just had the most profitable quarter of any app with $840 million in app revenue, is clearly now the most massive player in video/social/entertainment apps despite the best efforts of YouTube and Meta.
“The big silver screen is just disappearing, let alone the big plasma at home and its surround sound system, right?” Krantz recently told me on the TechFirst podcast. “Everyone, especially Gen Z, spends time on mobile consuming content.”
Outside of gaming, OTT/streaming is the largest category in terms of consumer spending on mobile, Data.ai shares in a recent report. So scheduled viewing won’t go away entirely, and Netflix and company aren’t just for the big screen on the wall.
The challenge is that its business model (expensive content for paying customers) requires far more capital than TikTok, Meta or Snapchat, while building from a more limited collection than established players like Disney or HBO. Moving to an ad-supported model, which Netflix has committed to, will take time and focus, and has the potential to detract from the product that has earned them more than 220 million paying customers.
OTT still has three times the consumer spending, Data.ai says, compared to short video apps.
But that’s not true for all segments, says Krantz.
“Generation Z [is] they spend about three times as much on short-form video as they do on OTT,” says Krantz. “That’s a really interesting trend… Can TikTok move into other categories with that very loyal base and then start trying to grow monetization more online with the bigger subscription games that are on OTT?”
Ultimately, the game is bigger and the cake is bigger.
Because there is another big category that is also absorbing time and income: games. And that is expanding to videos, concerts and social categories.
“To make it even more complicated, there’s a third player here,” says Krantz. “That is the base that we are not talking about today, which is the game, which is still the biggest category. And they’re moving into media and entertainment… so this is like a WWE match.”
That’s probably one of the reasons why Netflix announced its expansion into gaming a year ago, which is available in 190 countries worldwide. And it’s one reason once-separate categories merge 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 gaming and using their phones while watching fewer movies and TV shows. And that’s nothing new: It’s been trending for basically a decade.
Still, while teens may not be watching on the big screen, many spend large periods of time watching the YouTuber on shows that are sometimes quite long.
Precisely because of this, players seem to be converging: TikTok allows longer videos, YouTube doubles down on Shorts, and Netflix is looking for options for other ways to occupy attention. Not to mention Spotify bringing in videos with video podcasts, or Meta/Facebook trying to shift the entire conversation, and consumption model, to VR and AR in the metaverse.
The next decade is going to be interesting.