“It appears you’ve won the streaming wars!” shrieks an animated character on South Park. Like most of us, he thinks there’s a zero-sum battle between Netflix, Disney+, and others. Except streamers aren’t mutually exclusive. You can subscribe to as many as you want. In fact, the average U.S. household already subscribes to an extraordinary 5.2 video streamers, a stunning 400% jump from just a few years ago.
Fake wars are somewhat of a tradition in Hollywood. Decades ago, the “TV Wars” pitted the first three TV networks against each other. Not only did they all survive, but they also thrived and multiplied into a whopping explosion of over 200 TV channels. Today, with a surge of more than 100 hundred streamer Apps and counting, streamers are following their TV network ancestors’ trajectory. It’s not a streaming war: It’s a streaming tsunami–and the tidal wave is colossal.
There is however a brutal battle raging right now on a digital battlefield few know of. It’s the bruising face-off among connected TVs (CTVs) vying to capture your living room. As it’s a fight to command just that one TV in the room, it’s a zero-sum game, with clear winners and losers. Welcome to the real streaming wars.
Internet-connected digital TVs have been thrust into Hollywood’s spotlight as platforms that aggregate, monetize, measure, and distribute the streaming tsunami. According to Leichtman Research Group, “87% of U.S. TV households now own a CTV.”
Welcome to the connected TV wars
The combatants in these invisible wars are Asian original equipment manufacturers (such as Samsung and TCL) and Silicon Valley tech titans (such as Google and Amazon). Their products come in two flavors: A smart TV with an operating system or an add-on device with an operating system. Both are hardware-software combos, but it’s always the software that drives the bulk of revenue–and all the eyeballs.
The global CTV market was worth $239 billion in 2022 and is forecast to hit $358 billion by 2027. It already eclipses all global theatrical movie, music streaming, and pay-TV markets combined.
In a meaningful milestone in the era of digital media, CTV penetration has surpassed Pay TV for the first time in history and led the Pay TV juggernauts to hemorrhage subscribers and revenue.
Pay TV’s 30-year-old business model has also flipped. Instead of Pay TV spending billions in carriage fees to Content Providers (Warner Bros, Disney) to carry their TV Networks, now it’s the content providers paying millions to CTVs to carry their streamer apps. CTV ad spending reached $21 billion in 2022. That’s up 39% from 2021, and on track in a few years to surpass linear TV’s 2022 $68 billion ad spend.
Equally game-changing is the ad-supported streamer owned by each CTV. These native streamers drive hundreds of millions in revenue because the CTV controls all the ad inventory and the streamer’s prime placement. In addition to being a top revenue driver, they are the second most viewed ad-supported streamer on each platform after YouTube. CTVs also compile viewer-level, real-time data for ad measurement, targeting, and content recommendations.
Perhaps the most seismic shift is how CTVs have democratized content by leveling the playing field between big and independent media. The CNN app is positioned beside the “Newsy” app, thereby decimating what’s left of big media’s long-prized distribution advantage.
This makes the home screen on your TV the most valuable real estate in entertainment today. A great example of how some in Hollywood are awakening to this new force is actor-turned-entrepreneur Ryan Reynolds. He realized the value of this ultimate weapon of mass media and joined MNTN, a CTV ad service, as chief creative officer. In a company ad, he proclaims “Connected TV is the future, and it’s already here.” Success though has been 20 years in the making.
At the turn of the century, Netflix incubated the first CTV which they spun out into a new company called Roku. Two decades later, the battle lines have been drawn and Roku is clearly the winner. Thus far, Roku is the CTV champion with a monstrous 70 million active accounts and a mammoth 40% market share. Their spectacular scale is equal to all Pay TV subscribers combined. Roku also has its own ad-supported streamer that’s watched by an estimated 80 million people (Roku representatives have told me that figure is now closer to 100 million). Jenn Vaux, Roku’s VP of content acquisition and programming and a highly experienced Hollywood executive, says the company’s unique position enables it “to build an educated framework by focusing on content lanes that resonate with our audience.” It seems to have worked.
By focusing on innovation, Google TV has made an exciting debut to become one of the fastest-growing players, seizing a 6% share of premium video minutes in a few short years.
Shalini Govil-Pai, the general manager of Google TV, is a highly accomplished Hollywood and tech trailblazer who attributes their growth to a similar focus on audience preferences. “With the growing volume of content, we found that consumers end up spending more time looking for something to watch than time actually watching. We help users easily find and discover movies to watch all in one place,” she told me. Their strategy to solve the problem of chaotic and frustrating content discovery could be the biggest threat to the reigning heavyweight champion.
While attention-grabbing headlines of streamers battling it out are terrific fun, the real streaming wars have far more at stake: delivering on the promise to upend legacy media.
“We want to conquer TV the same way Apple did mobile,” a CTV executive recently told me. Even Netflix is reportedly looking to acquire its old offspring Roku for a variety of purported reasons. Perhaps Netflix know the real streaming wars are not a clash against other streamers. It’s a world war to capture the real battleground: your living room.
Aden Ikram is a veteran of both ‘Streaming Wars’ and a graduate of NYU’s Digital Media program where he built one of the first movie streamers and later made his own makeshift CTV.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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