Even before the outbreak of the coronavirus and onset of social distancing spurred demand for at-home entertainment, increasing numbers of consumers were turning to streaming television services. Younger generations had already shown a preference for streaming over cable and satellite; with streaming catching on among other demographic groups, this shift is starting to look less like market differentiation and more like a coup de télévision.

The growth has led to an explosion of streaming services, both small and large. In the past year, giants Disney and Apple waded into the market with new services, joining Netflix, Hulu and Amazon. NBCUniveral and HBO will launch offerings this year. And niche streams have proliferated — fans of Japanese animation, horror shows, British television and even actor Kevin James all have dedicated services.

“The shift from linear to streaming is a consumption shift and it’s a business model shift,” says Brad Barrett, a Capital Group equity analyst who covers media. “It’s going to result in a totally different market structure.”

This all adds up to a dynamic and growing space, and one that’s changed dramatically in the past decade. It’s easy to forget that Netflix first released its own content in 2013.

Of course, that dynamism means the industry may take unpredictable turns. It’s not clear, for example, if the market can support several large streaming services or if the subscription model will continue to dominate. There’s likely to be a lot of experimentation with content and pricing models before it all settles down.

Nevertheless, technology improvements and evolving lifestyle habits make it likely that streaming will continue to gain in popularity. This creates opportunities for content providers eager to capture a piece of a burgeoning market. And though streaming has created hurdles for cable TV providers, it has also benefited many of those same companies by boosting demand for high-speed internet service that’s a prerequisite for streaming.

Many factors make it likely that the move to streaming will accelerate.

Streaming services have a huge leg up on other players in the video services market: Many younger viewers are turning to streaming as their primary form of in-home video consumption. That generational shift has been a huge driver for growth and will likely cement streaming as the first choice for in-home video.

Part of that is due to convenience, as viewers can access content at any time across a variety of devices. But freedom from time slots isn’t just consumer friendly, it’s also a big win for streaming platforms. In the network world, prime evening times are the most watched and thus the most valuable. The most popular shows, or those with the potential to draw big audiences, must go in those slots. That places a natural limit on how many shows a network can support, because daytime and late-night slots don’t have nearly the same level of viewership. But streaming services can support any show they have faith in; viewers self-select the content, so there’s no limit to what can go on a platform.

“Limited shelf space versus unlimited shelf space makes a big difference,” Barrett says.

Another point in streaming’s favor is its strong value. Each of the major services offers literally billions of dollars of entertainment and does so at lower prices than a trip to the cinema. While streaming services are not cleanly comparable to cable or satellite, partly because they don’t have to maintain the internet infrastructure they depend on, they have a strong and clear value proposition.

International markets are likely to become the next big growth area. Few media markets have enjoyed the kind of robust, high-gloss productions that Americans are used to. That’s partly due to audience limitations: English is one of the most widely spoken languages, so an English-language production travels well. But other languages, such as Polish and Turkish, are spoken by tens of millions. Massive streaming companies have the reach and the funds to produce high-quality native-language content for these regions — something that smaller regional networks may not have the resources to pull off.

“Everyone on Earth loves watching TV,” Barrett says. “And a billion-plus households have already declared their willingness to pay for video services.”

Scale is a powerful force multiplier.

One of the key features of a streaming service is a strong flywheel effect. Subscriber fees pay for programming, which attracts more viewers, while a growing subscriber base provides more funds that can be reinvested into ever bigger and more diverse programming.

That’s been the strategy of Netflix. The service has brought in megastars to helm prestige projects such as The Irishman; it’s worked with Adam Sandler to create broad, crowd-pleasing comedies; and it’s expanded on breakout shows such as the nostalgia-laden Stranger Things. While these projects have all been expensive — The Irishman reportedly cost nearly $160 million — they’ve helped the service cultivate its 160 million-plus subscriber count.

And those kinds of outsize projects can be huge attractions, dominating water-cooler talk and online discourse. Properties such as Game of Thrones can become an integral part of the zeitgeist, at least for a while.

“There’s a very underappreciated social element to TV and movie watching,” Barrett says.

For some properties, that buzz can create a sort of escape velocity. When a lot of people watch and talk about a show or movie, that attention can prompt others to jump in and watch too. That’s one of the benefits of scale — being large enough to be front of mind.

But to capitalize on that new viewership, streaming services must continue to offer enough compelling content to justify their monthly fees. They can’t rely on a single blockbuster; they need to have a lot of consistently viewed programs and movies.

“The most powerful flywheel is a tight relationship between the business growing and the service improving,” Barrett says. “When a streaming service chooses to reinvest into entertainment, that’s what they have.”

                        The above article originally appeared in the Spring 2020 issue of Quarterly Insights magazine.