Netflix, Amazon, and Hulu lead the U.S. subscription streaming video market, a fact of some importance as Disney and others prepare their own entries into the market. The main observation is that it is going to be quite hard for any of the new entrants to displace Netflix or Amazon. For most, the issue is to catch Hulu.
One possibly highly-significant data point is that the market structure of the subscription video streaming market is highly congruent with what one would expect in a stable market. The reason is that there generally is a direct relationship between market share and profitability.
Some note there is a similar return on sales and market share relationship.
The “classic” stable pattern would have market shares where the market leader had twice the share of number two, which in turn has twice the share of provider three. Some might refer to that as a “rule of three.”
Note that online advertising market share has roughly this pattern as well. By some estimates, mobile device brand market share has roughly that pattern as well.
The point is that it is reasonable to expect that profits are directly related to market share, with a pattern where the leading three firms have something like a 40-20-10 share pattern, or perhaps 35-17-8 pattern.
Source: Reperio Capital
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