The Real Streaming Wars Contenders

This week I want to introduce a new series called “The Real Streaming Wars.”

I’ve been building video streaming products at tech and media companies for over 10 years. As the former Head of Product at Sports Illustrated, People, Yahoo, and Wurl, I started building free ad-supported television (FAST) channels before the industry had a name for them.

I’m now working at a fast-growing startup called OrkaTV. We are connecting premium FAST Channels with advertisers in our Streaming TV ad marketplace. In just over a year, OrkaTV monetizes 3,000+ FAST Channels as a leader in the space.

(Disclaimer: The views and opinions expressed in this blog are my own and do not necessarily reflect the views and opinions of my employer.)

Now that I’ve hopefully established my streaming credentials, I’m going to make a case over the course of this series for why companies such as Disney+, Max, and potentially even Netflix are just distractions in the Streaming Wars. It’s been fascinating to read and listen to pundits over the years talk about the fights between “contenders” Paramount, Peacock, and whatever they are calling HBO these days.

Meanwhile, there are juggernaut companies quietly making moves behind the scenes to best position themselves to win it all. It’s very much like when the seven kingdoms of Westeros were battling for the throne, while the white walkers marched on the wall ahead of a much larger war. Of course, the battle for the future of television would play out like “Game of Thrones,” arguably one of the best TV shows.

Why is figuring out who is going to win the Streaming Wars important? The global CTV market was worth $239 billion in 2022 and is forecast to hit $397 billion by 2027. This growth will largely come from cord-cutters leaving traditional linear and cable television. 42% of the population are now cord-cutters in 2023. This shift puts the television industry in a really tough spot. Not only are they spending billions on content to arm up for the Streaming Wars, but they are also losing a major source of revenue during this shift. Television is spoiled with three main revenue streams. Advertising, subscriptions, and carriage/retransmission fees. It’s the last one that currently doesn’t have a counterpart in streaming, but according to TVRev, hauls in $12-15 billion per year for TV. Streaming, on the other hand, only has two main revenue streams — subscriptions and a growing advertising business.

With all of this money at stake. Let’s find out who the “Real Streaming Wars” contenders are. In this first installment, I’m going to highlight the South Korean Electronics Manufacturer Samsung. Samsung you say? You don’t see their name pop up much when it comes to who will win the Streaming Wars. But Samsung is a juggernaut. Let me explain.

Owning the Screen

Samsung has been the undisputed #1 SmartTV Manufacturer for 17 straight years. They own 32% of the global market. 100 Samsung Smart TVs are sold every minute. The New England Patriots won 17 AFC East Division titles in 20 years. That’s the level of dominance Samsung has reached in building and shipping Smart TVs.

The first Samsung Smart TV was released in 2008. It was called the Samsung Series 8 and was the first TV with built-in Internet connectivity and the ability to run apps and online content. I always like a good Yahoo! story as an alum, so I was surprised to find out that the platform was based on the Yahoo! Widget Engine that powered Yahoo! Connected TV. The Yahoo! Connected TV Store allowed developers to offer paid TV apps from $0.99 cents to $99. Of course, Yahoo! built the first app store on Smart TVs, and ultimately abandoned it in 2017 when Verizon acquired Yahoo. Anyway, this post is about Samsung and not pouring a beer out for all of the Yahoo! missed opportunities. (BTW, after three years of using thousands of exclamation marks for the Yahoo! logo in my writing, I don’t miss it.)

Samsung launched its own “Smart Hub” in 2011 which added “Smart Search” for discovering files across Samsung devices and a partnership with Hulu and DreamWorks to access video on demand (VOD) for the first time. Netflix finally launched on Samsung Smart TVs in 2012, which was the same year the streaming service began its expansion into Europe.

From Friend to “Frenemy”

Samsung’s dominance in Smart TV manufacturing is a great moat but it’s a high-cost, low-margin business. Due to increased competition, the average profit margin for Smart TVs is between 10-20%, which means Samsung may only charge $1,100 for a Smart TV that cost them $1,000 to make. Samsung needed an answer for how they could increase margins. They saw the massive growth of streaming apps such as Netflix and Hulu on their Smart TVs and decided to launch their own.

Samsung’s answer to Netflix was…”Milk Video.”

Kidding. Well, Samsung really did launch a video service they named “Milk Video” in 2014, which they named after their hit music service “Milk Music.” Well, that wasn’t a hit either, but they were Samsung’s answers to YouTube and Pandora respectively. I asked Google’s Bard why the heck Samsung named the service after Milk, and it said Samsung wanted to “evoke a sense of discovery and freshness.” Instead, Milk Video went stale just 10 months later and Samsung shut it down.

Now that Samsung got that video misfire out of the way, they launched a much smarter app for their TVs. Samsung TV Plus launched in 2015 as the first free ad-supported television service (FAST) built by a TV manufacturer. PlutoTV was actually the first FAST app to launch in 2014. Samsung hedged their bets by also investing $5 million in PlutoTV via their venture capital arm Samsung Venture Investment. Samsung TV Plus was initially just a nice addition that allowed them to generate a small, but growing CTV advertising revenue stream. 57% of U.S. households had at least one Connected TV device in 2015, but it wasn’t until the COVID lockdowns in 2020 that the number of users watching TV on a connected device spiked by nearly 10%.

Samsung, unwittingly, positioned itself to be in the perfect place to take advantage of this new demand by making Samsung TV Plus the default app in 2019. This meant that when a customer unboxes a new Samsung and turns it on, they saw the Samsung TV Plus app by default. You don’t know how many times I have had friends and family who know I work in the industry ask me if somehow they were getting “free cable” when they first experienced this.

Now that’s the kind of marketing gimmick you want for your new service. They launched Samsung TV Plus on mobile and the web in 2020. That same year they launched their own self-service demand-side platform (DSP) that enables media buyers to directly buy advertising across Samsung’s FAST, VOD, mobile, and desktop ecosystem. In 2022, Samsung announced it would begin licensing its TV OS, Tizen, to third-party smart TV original development manufacturers (OEMs) Atmaca, HKC, and Tempo which gives them more control over the end-user experience.

Fast forward to 2023, and Samsung TV Plus comes pre-installed on over 75 million U.S. devices and has 18 million monthly active users in the coveted U.S. market. It also boasts over 100 million device installs worldwide, but Streaming TV revenue is currently significantly smaller outside of North America. They also say TV Plus streamed 3 billion hours of content in 2022. Samsung quickly went from just “dumb hardware” to now streaming over 220 premium channels in the U.S., and 1,600 globally. Studios now find themselves vying for placement on Samsung TV Plus where Samsung dictates the inventory split and rev-share terms for advertising. In January, it was reported that Samsung is working on licensing their FAST Service Samsung TV Plus to TCL. This follows Roku and Apple’s model of trying to expand their FAST Service app growth beyond their own devices.

It’s clear that Samsung is now going all out to try and seize the CTV opportunity, but can they actually win?

How Samsung Wins

If Samsung is going to win the Streaming Wars they need a defensible moat. Dominating device sales for 17 straight years checks one box. Samsung TV Plus and its app store have become good enough to take meaningful share from CTV devices such as Roku, Chromecast, and FireTV. Being the default option for how viewers consume content is why SmartTVs now own 62% of the CTV market.

Owning the device also gives Samsung exclusive access to viewership data. With data being the world’s currency, this gives them another edge over the competition. In fact, SmartTVs enjoy access to a particularly creepy form of data gathering called automatic content recognition (ACR), which is used to both listen to and watch what you are playing on the screen. This data is invaluable. Samsung uses it to target ads, personalize content recommendations, and measure viewership. This makes their DSP product that much more attractive to advertisers, and it’s a feature only SmartTVs can offer unless competitors want to pay very high API fees to access it from them. All of these products put together amount to a compelling reason why Samsung could take a lion’s share of CTV ad spend over the coming years.

Combined ad spend across CTV and TV in the U.S. is forecasted to reach $98 billion by 2027. This would be a great total addressable market (TAM) to go after for most companies, but Samsung is the 21st largest company in the world with a $368 billion market cap. This scale is a double-edged sword in terms of Samsung’s chances of winning the Streaming Wars. Do they focus more resources on streaming, or try to grab a larger share of the smartphone market, where they have a leading 22% share of a forecasted $792 billion TAM by 2029? Or how about the semiconductor market that’s forecasted to grow to $1.3 trillion by the end of the decade due to advances in artificial intelligence, etc? Even with all of the advantages we discussed, I believe the only way Samsung wins is through acquisition. The company Samsung should acquire to win the Streaming Wars is Roku.

Why Roku is the Ideal Acquisition

As we mentioned previously, Samsung dominates Global smart device market share, but Roku owns the coveted U.S. market. No serious contender can win the Streaming Wars without winning the lucrative U.S. ad market. Roku is known for its CTV dongles, but they also power many smaller Smart TV devices with their Roku OS, and this year they launched their own SmartTVs.

In 2023, Hulu will make the most CTV ad dollars ($3.63 billion), followed by YouTube ($2.89 billion) but Roku ($2.19 billion) is a close third. They have turned their own FAST Service “The Roku Channel” into a top contender since launching in 2017.

A lot of media pundits might think the better move is to acquire a studio to provide Samsung with exclusive content, such as when Amazon bought MGM for $8.5 billion in 2022. I think that strategy is wrong. All of the Studios are hemorrhaging money as a result of trying to replicate Netflix’s subscription business model. Now, the headlines are filled with companies such as WarnerBros Discovery looking to license content to Netflix and other services again to try and achieve profitability. I predict in the next few years a lot of streaming services such as Peacock and Paramount+ will be deprecated or merge. At that point, you want to be a service such as Samsung which can strike favorable content licensing deals, when studios are desperate.

I haven’t quite decided whether or not Samsung should keep the Roku brand if they acquire them. It’s definitely not as iconic as HBO, so there’s no concern Samsung will go “Mad Max” on an iconic brand. I think it could be fine to keep separate brands and realize synergies across SmartTV manufacturing, ad tech, and supply lines. The combined dataset Samsung and Roku would have in the CTV space would be a gold mine for advertisers. Samsung + Roku would own the screen for over half the CTV viewers both globally and in the U.S.

Roku’s stock did rise 11% on the recent news that they inked a partnership with Shopify to enable viewers to buy products from merchants via their SmartTV. This does look like a unique twist on shoppable ads, but I have launched many iterations before, and getting users to buy something with their TV remote adds a lot of friction. That said, this deal will 100x if Samsung buys Roku and brings the same Shopify experience to its massive, global user base. Also, despite Roku’s stock bump, its $10.6 billion market cap is not going to scare away the much larger Samsung ($368 billion market cap). Yes, Samsung is facing some major headwinds in its semiconductor division, but this Roku acquisition is exactly the type of growth story that could help right the stock. I also think Samsung would skirt any regulatory issues, whereas notable Big Tech companies in the streaming space such as Alphabet, Amazon, and Apple would be more likely to get blocked from acquiring Roku.

So there you have it. I hope I’ve convinced you to take Samsung more seriously as a Streaming Wars contender.

I plan to highlight two more contenders vying for the Streaming throne in the coming weeks. If you’re feeling lucky, comment with who you think the other two are. The only hint I will give is one has a market cap significantly lower than Samsung and the other behemoth is significantly larger.

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🤙 Moffie