It was supposed to be a great season for Netflix. Anticipation was building for the May 27th season four release of their long-running hit, Stranger Things. Instead, ten days earlier, the company announced significant layoffs following a steep decline in subscribers and revenue.
But the struggles are not limited to Netflix. Just two years ago, many were calling this the “Golden age of Streaming,” as billions of dollars were poured into content development creating a steady stream of binge-worthy series. But today’s fight for subscribers, or the “streaming wars” as some are calling them, is the beginning of a shift in Hollywood that will change the landscape of who makes content and how it gets distributed. And with the emergence of Web3, it’s a shift that will be as significant as the death of the video rental store.
Consumers are frustrated
Netflix was a revelation when it came on the scene. It offered seemingly endless options, since there was no competition for the rights to stream big studio hits. And the convenience of no longer having to rewind and drive to return tapes was irresistible. But these days, increased streaming options (as well as fears of another recession) has consumers questioning the rationale of paying for multiple streaming sites.
With stalled subscriber bases, the pressure is mounting for executives to pick the next big thing. And that heightened pressure, along with slashed budgets for experimentation, has executives more risk-averse than ever. That’s why we’re no longer in a golden age, but instead stuck in an era of prequels, sequels, and reboots.
Remember, Stranger Things was supposed to be a one season series. And sure, it’s not all sequels. Streamers are also going for safe bets in the form of shows that have been proven overseas like Squid Games, time-tested directors like Scorsese in the case of The Irishman, or existing IP with anything DC or Marvel. This is not to say there’s no original content. But truly original, unproven work is few and far between.
Creators (and communities) will drive the change
At its peak, Netflix was spending about $17 billion a year on content development. With these budgets, up-and-coming creators had a chance—albeit a slim one—of breaking through and selling projects. But that’s no longer the case. The economics of subscriptions don’t justify those development budgets anymore. Add to that the fact that streamer deal terms are getting less favorable by the day, with a cost-plus model becoming a norm that reduces upside by 90% for a second season due to eliminated backend participation. At a recent industry conference, entertainment executive, producer and investor Jeff Sagansky slammed the trend, saying the deals that writers, directors and actors “are being forced to sign” are “brutally unfair” and “ridiculous.”
With these smaller development budgets, and risk averse executives conspiring against creators too, unless you’re a proven commodity, playing the weekly lottery might be a better bet. Selling content has always been hard, but in this environment it’s nearly impossible.
Still, creators don’t stop creating. They find new ways to share their work. And fan communities don’t stop engaging with characters and storytellers they love. They find new ways to interact and participate.
Web3 is going to be the future of streaming
Creators flocked to YouTube in the early days of Web2. For the first time, they could share their work directly with consumers and build an audience without the support of a studio. They could also monetize the content. It was incredibly successful, but for up-and-coming creators, most of whom missed the YouTube generation, the incentives are no longer there. With little chance of catching the attention of streamers, and with YouTube saturated with content, we’re seeing new as well as established creators turn to Web3 as a way to not only build a community directly with consumers, but to monetize their content, and give fans an opportunity for ownership.
The promise of Web3 is around ownership and participation. Web3 allows creators to build content alongside their fans, and early signs are incredibly encouraging.
With our own recent Web3 project, The Gimmicks, Mila Kunis served as executive producer; two acclaimed writers, Dave Ihlenfeld and David Wright from Family Guy and Star Trek: Lower Decks, signed on to pen the show. The Web3 format is enticing to Hollywood players in part because of its ability to engage fans in real time, giving them a say in storylines and character arcs.
While The Gimmicks is admittedly in its nascent stages, its audience engagement figures are something that today’s streamers, in the midst of heated competition, would love on a large scale. Within a few months, the project is already nearing 1 million on-chain actions (which aren’t free by the way) driven by recurring weekly engagement from a rabid community of about 5,000 total NFT holders.
Could this be the future of interactive TV and community building? Perhaps. There are of course uncertainties about the potential for Web3’s widespread adoption, driven by a recent decline in the market. But its promise of community ownership and participation is appealing enough that several streamers are already looking to Web3 projects for potential new content deals. And let’s not forget David Letterman’s infamous words to Bill Gates some 30 years ago: “What about this internet thing? What the hell is that, exactly?”
Streamers need to pay attention or risk becoming the next blockbuster
In addition to the industry consolidation that’s sure to come, we will see a new form of streaming. The next Netflix could very well be in Web3. Whether it’s a new entity or an existing studio that figures it out remains to be seen. But either way, it will take more than simply minting NFTs of known IP, which is what many platforms and studios have done to date.
Web3 at its highest level is not about day trading and cash grabs. It will use the blockchain to take interactive storytelling and immersive community experiences to a whole new level. And while it’s still early days, consumer and streamer interest has already been piqued.
Web3 will fundamentally transform how stories are produced and experienced because it presents an opportunity for consumers to participate in content in ways that they’ve never been able to before. And for studios, Web3’s unique interactive possibilities through NFT tokens means direct community building, deep engagement, and ongoing fan participation.
Maybe they’ll figure it out in time for season 5 of Stranger Things. A tokenized trip through the Upside Down would be pretty cool.
John Attanasio is the CEO and Cofounder of Web3 animation studio, Toonstar