If you want to enjoy movies and television shows when you feel like watching them and not when they’re playing in theaters or being broadcast over the airwaves, there are more than a handful of services to choose from. In this article, we’ll take a look at four of the biggest names in on-demand home entertainment, what each has to offer, and how likely these companies are to succeed.
- Netflix is the largest entertainment streaming service, with more than 200 million global subscribers.
- Hulu is a majority-owned, private company that earns a hefty portion of its revenues through ads.
- Redbox, with over 40,000 kiosks, controls most of the DVD rental market.
- Blockbuster, once the leader in video rentals, has a faint existence through its streaming-video partnership with Dish Network.
- Netflix and Hulu have gained a large following for their proprietary content.
Hulu, a private company owned by Comcast (CMCSA) and The Walt Disney Company (DIS), launched its website to the public in 2008 and offers hundreds of TV shows from ABC, BET, CBS, Comedy Central, CW, FOX, NBC, and other networks through its streaming internet video service. Hulu is unique among its competitors in that it has a dual revenue stream from both paid subscriptions to its premium service (called Hulu Plus) and advertising.
Hulu has earned ad revenue from more than 1,000 brands, and its major advertisers have included McDonald's, Visa, Pepsi, Microsoft, Toyota, Honda, State Farm, and Procter & Gamble. Hulu’s free and premium services both contain ads, though the latter has fewer.
Hulu has a variety of subscription plans, from the basic package at $5.99 per month to Hulu + Live TV (no ads) for $70.00 per month. Compared with the free version, which only lets users watch shows on their computers, the premium version lets users watch shows on a variety of devices. The premium version also streams in HD, when available, and lets users watch all current-season episodes of popular shows, as opposed to only the five most recently aired episodes and complete past seasons of shows.
Hulu says including a modest number of ads in its premium service helps keep subscription costs down, and it is considering a higher-priced, ad-free model.
Because of its connection with Comcast and Disney, Hulu offers a wider range of current TV shows than its competitor Netflix.
“Hulu has developed the best ad-supported platform in the business,” says Seth Shapiro, an adjunct professor at the University of Southern California’s School of Cinematic Arts and a Television Academy governor. “However, they are primarily television- and original-content based, with a limited movie library.”
In 2011, Hulu Plus featured the Criterion Collection, a selection of more than 800 classic and contemporary films that Criterion describes as containing the “defining moments of cinema.” However, in 2016, Turner Classic Movies' streaming service FilmStruck acquired Criterion.
Hulu has 70 original shows like “The Handmaid's Tale,” “No Man's Land,” and “The Only Way Is Essex,” but its unique programs haven’t received the attention or the awards that Netflix’s original series have.
Though ads can be annoying, especially with paid content, and the movie selection is limited, don’t write Hulu off. In 2020, Hulu earned $4.4 billion in revenues and entertained more than thirty-nine million subscribers.
“Netflix is the champion that all comers must evaluate and work toward superseding,” says Harlan Platt, a finance professor at the D'Amore McKim School of Business at Northeastern University. Netflix (NFLX) was founded in 1997, began offering DVD rentals by mail in 1999, and went public in 2002. The company launched a streaming service in 2007 and now offers thousands of movies and TV shows with unlimited, ad-free viewing on numerous Internet-connected devices. Netflix does not sell advertising and relies on subscription fees for its revenue. In 2020, the company earned $25 billion in revenues.
Netflix’s streaming subscriptions start at $8.99 a month for standard definition viewing on a single screen. For $13.99 a month, users can watch shows in HD on two screens and download content to two devices. The premium service, at $17.99 per month, allows up to four devices to stream unlimited HD or Ultra HD content, as well as four devices to download content. Any service comes with a free trial month and can be canceled online anytime.
Renting DVDs by mail costs $7.99 a month to have one DVD out at a time or, under the Premier plan, $14.99 to have two discs out at a time. Subscribers enjoy an unlimited number of times they can rent per month, free shipping and returns, and no late fees.
Netflix has over 208 million subscribers worldwide, more than both Disney Plus at 100 million subscribers and HBO Max at 41 million subscribers. In 2020, it gained approximately 36 million subscribers.
Indeed, the company has become well-known for its original hit series “Orange Is the New Black,” which received 12 Emmy nominations, and “House of Cards,” which received 13 Emmy nominations. In-house content not only helps Netflix distinguish itself from its competitors; it also comes without licensing fees, which are a major expense.
Netflix is also broadly available internationally. Unlike Hulu, which offers to stream only in the United States and Japan, Netflix is available throughout North, Central, and South America, and in some parts of Europe. In the long run, it may move to China.
Founded in 2002 by McDonald's, Redbox is a DVD-rental service with a physical presence. Its 40,000 self-serve kiosks are available inside or outside of grocery stores, convenience stores, drug stores, and mass-merchant spots.
Owned by Outerwall (OUTR), which also owns Coinstar, Redbox was founded in 2002 and initially had two types of vending machines at McDonald’s restaurants: one that rented DVDs and one that sold convenience store items like milk and shampoo. It discontinued the convenience store kiosks and began using the Redbox brand for the DVD kiosks the following year. It purchased Blockbuster Express’s DVD rental kiosk business in 2012.
Redbox’s business model is based on emphasizing new releases, the lowest possible prices, and not requiring a monthly subscription. In 2008, it struck a deal with most major movie studios getting new DVDs the day of release or 28 days after.
Customers can reserve movies online or simply choose from what’s available at a kiosk. Rentals are due by 9:00 p.m. the day after a customer rents them, which can make returns inconvenient. However, a disc doesn’t have to be returned to the same kiosk it was rented from.
Redbox charges for additional rental days when a customer keeps a rental past the deadline. Out of the four services covered in this article, “Redbox comes up last because it’s primarily physical only, which is an old model,” Shapiro says.
According to the FCC’s Eighth Broadband Progress Report, 6% of the U.S. population does not have broadband, which means streaming services are out for this demographic. This makes Redbox, with its rentals significantly less expensive than streaming service rentals, attractive.
But unlike Redbox kiosks, streaming services never run out of physical copies, and they don’t require customers to leave home or wait in line. As a result, Redbox has begun to bridge this gap with its free Live TV service and Redbox On-Demand, a streaming service where users with certain devices can rent or buy select features.
“Redbox’s franchise may be undermined by its limited offerings,” Platt says. The company makes up to 200 titles available at a time, far fewer than Netflix or even Hulu, though its titles have more mass appeal than Hulu’s. Redbox also controls most of the physical DVD rental market, and it also can reach a market segment that its top rivals can’t because it offers video game rentals for gaming platforms, such as PlayStation, Nintendo, and Xbox.
Blockbuster opened its first in-person videocassette rental store in Dallas in 1995. The company went public in 1999 but fell short of expectations in its IPO. Blockbuster declined to purchase Netflix in 2000, and in 2004, it started its own DVD-by-mail rental service to compete with Netflix. This move led to a patent infringement lawsuit in 2006 for which Blockbuster paid Netflix $4.1 million in 2007.
In 2009, Blockbuster began a direct competition with Redbox with its own $1-a-night DVD rental kiosks. But after accumulating more than $1 billion in debt, Blockbuster was delisted from the NYSE in July 2010 and filed for chapter 11 bankruptcy in September 2010.
It became a subsidiary of Dish Network (DISH) in 2011, and in November 2013 the company announced that it would close all 300 remaining company-owned stores and its DVD subscription service by January.
Ironically, Netflix produced a documentary titled "The Last Blockbuster," which sparked worldwide interest in the last standing Blockbuster franchise (Bend, Oregon).
Today, Blockbuster’s business is streaming. Blockbuster partners with Dish Network to provide subscribers access to new releases and popular content. The service offers movie channels, including EPIX and FXM, movies on demand, and direct streaming to TVs, computers, and iPad.
“Blockbuster on Demand is the shadow of the former 800-pound-gorilla when Blockbuster was king of movie rental,” Shapiro says. And Platt says it “seems to be just another wannabe.”
Streaming Services Economics FAQs
What are the largest streaming entertainment services?
Netflix is the largest streaming entertainment service, with more than 208 million subscribers globally. Following closely are Disney Plus and Hulu, with 100 and 39 million subscribers, respectively. Receiving honorable mentions are Redbox and Blockbuster streaming, offered by Dish Network.
Why did Blockbuster's streaming video go out of business?
Blockbuster's retail operations ceased after it filed Chapter 11 bankruptcy; however, it partners with Dish network to provide video streaming to subscribed customers.
Is Redbox publicly traded?
Redbox is privately owned. However, in May 2021, Redbox announced that it will go public after it merges with Seaport Global Acquisition Corp (SPAC).
Can I buy Hulu stocks?
Hulu, owned by Disney and Comcast, is not publicly traded. Therefore, an investor cannot purchase Hulu stocks.
Does McDonald's own Redbox?
Redbox was founded by McDonald's but was acquired by Outerwall in 2009.
The Bottom Line
Today, Hulu, Netflix, Redbox, and Blockbuster each have some unique features, some overlapping services, and varying strengths and weaknesses. Will one on-demand TV and movie service eventually push all of its rivals out of business, or will they continue to thrive alongside each other by offering services so unique that customers will feel compelled to use more than one?
*Disclosure: At the time of writing, the author had no holdings in any of the companies mentioned in this article.