Netflix Is Five Guys and Hulu Is McDonald’s: How Hamburgers Can Help Explain The Streaming Wars

One of my favorite anecdotes from my time working at a streaming company originated during a strategic planning session. We were trying to define the type of content we were making, and someone pointed out we were making high quality TV shows. Award-winning, prestige type shows. Then my boss said, “If the rest of the town is making hamburgers, we’re making foie gras burgers.”

It’s a good line. The problem? We were selling those foie gras burgers on the equivalent of the streaming video dollar menu.

Would you pay $2 for a foie gras burger? Probably not. Price sends a lot of signals to customers about quality. It’s sort of like cheap sushi or shellfish. Do you really want a lobster tail that only costs $5?

This story seems particularly relevant in light of the recent news that Apple TV+ will only cost $5 per month. (I round up a penny to make things simple.) Meanwhile, AT&T is debating lowering the price of their new service, HBO Max, to $15, the same as HBO charges now. Tons more content, same price!

Fast food analogies work pretty well explaining business strategy because every likes hamburgers. Let’s blow that analogy out, taking an old strategy maxim about fast food, and applying it to the streaming wars. We’ll find out who’s content strategy and pricing aligns (Disney, Netflix) and whose doesn’t (Amazon, Apple).

The Fast Food Analogy That (May) Explain the Streaming Wars

A common project management tool is called either the “triangle of constraints,” “iron triangle” or “unattainable triangle”. The logic goes something like this: When you are managing a project, you can have two of three qualities…

IMAGE 1 Project Managemnet Triangle — Source: Wikipedia

In project management, this is best described when someone is submitting a bid for a project. Imagine a contractor coming to your house to remodel your kitchen. If you want it done quickly, and still look good, it will cost a fortune. If you want it affordable but done quickly, it won’t be very good. And if you want affordable and very good, well, your house will be a mess for months. (Which is what people usually choose.)

I’ve seen this applied to businesses, particularly fast food. A company can be good at delivering high quality, speed or low cost, but usually not all three. So…

McDonalds: Fast, cheap, but not very good.
In-and-Out: Very good, cheap, but can take FOREVER.
Carl’s Jr or Hardees: Good, fast, but expensive. (Six dollar burgers?)

With this analogy, you can start to see the tradeoffs in different business models. Tradeoffs most industries have to contend with.

Tweaking This Concept for the Streaming Wars

The idea of a triangle of constraints has since been applied to other different businesses (in data storage, you can get cheap, fast or reliable) and even different fields entirely (here’s one about government from Steven Pinker: you can be free, fair or equal, but not all three). To apply the fast food model to streaming, we need to tweak it. We’ll keep two components the same: quality and price.

What about the third tradeoff? In streaming, delivery “speed” isn’t really a factor. Everyone has the same download speeds (more or less) and it’s all on-demand anyways. However, the amount of “quality” you get can vary wildly between streamers. Instead, the real tradeoff is volume, the amount of content you can watch for any given subscription. On the low end, AppleTV+ will have 7 TV series only at launch. On the high end, Amazon will have 14,000 movies and 50,000 TV episodes. That’s a pretty big gap!

We have our trilemma: high quality, lots of volume, or low prices. Pick two. I’ve gone through each company with my take on what they are good at and which fast food company this makes them.

Disney Plus is In-And-Out

Very few companies offer high quality at low costs. But both Disney+ will and In-and-Out does, so Disney+ becomes our iconic California burger chain. (As a CA native, I ride and die for In-and-Out.) Truly, Disney will have one of the sparsest film slates among the streamers. Over at my website, I made projections for each streaming service’s 2020 catalogue in film, and Disney is clearly the lowest:

But what a slate it will be! By the end of next year, it will have six of this year’s top ten highest grossers at the box office, along with 8 Star Wars films and many more Pixar, Disney Animated and Marvel films. In short, while it is light on content, Disney+ is pound for pound a great content library. Sort of like how In-and-Out doesn’t have a huge menu, but what they serve is delicious.

Netflix is Five Guys

Before I started writing, I would have called Netflix the McDonald’s of streaming services. They started out that way, offering tons of streaming series and costing only $8. But here’s the thing: Netflix isn’t actually cheap anymore. Or low quality. Look at this Tweet:

Monthly subscription costs for U.S. streaming services:

HBO Now $14.99
Netflix $12.99
Hulu* $11.99
Showtime $10.99
CBS* $9.99
Prime $8.99
Starz $8.99
Disney+ $6.99
AppleTV+ $4.99

Total cost: $90.91 per month

(*ad free versions)

— Jon Erlichman (@JonErlichman) September 10, 2019

After HBO, Netflix is the most expensive service out there. Which makes sense since they offer the second most volume in terms of shows, while funding big budget films like The Irishman or series like The Witcher. Something had to give, and Netflix has slowly gotten more expensive, and we barely noticed. Five Guys isn’t cheap either, but has a good selection and quality (while being faster than a sit-down restaurant). It doesn’t hurt that Barack Obama famously loves Five Guys and ALSO works for Netflix. Also, Netflix and Disney+ are compared about as often as In-and-Out and Five Guys, so this analogy works.

Hulu is McDonald's

If you need someone who is cheap, that’s Hulu. Throw in the most TV episodes of any platform and you have volume. But do you have quality?

Well, maybe? Hulu nabbed some Emmys for The Handmaid’s Tale and trotted out a host of series this year with flashy stars like George Clooney. In a lot of ways, Hulu is moving away from what works—lots of TV—to a more muddled model that risks trying to be good at all three things simultaneously, and ending up failing. McDonald’s has done this too, every so often trying to replace the Big Mac and Quarter Pounder. As for popularity, whereas McDonald’s is clearly the biggest restaurant in America, we don’t actually know if Hulu or Amazon is second place in the streaming wars. Speaking of…

Amazon Prime Video is Burger King

Amazon’s Prime Video has the least coherent business strategy of the streamers in this framework. Essentially, they want to do it all: they have more movies by far than any other streaming service while being essentially free for Prime customers. Plus, they’re about to spend what some speculate is a billion dollars on the most expensive TV series in history on The Lord of The Rings.

Like Hulu, I question if this pays off in the long run. While they have a lot of movies and TV episodes, when it comes to highly rated TV series, for example, they don’t have a lot. Mike Raab at Medium made a chart of the IMDB Top 100 rated series, and well, Prime Video doesn’t have a lot:

Burger King isn’t known for high quality either, but it is fast. Prime Video is clearly the second place streamer, much the same way that Burger King is the second place hamburger chain.

HBO is Umami Burger, While HBO Max Is Shaping Up To Be Starbucks

Sorry, I had to ditch my own hamburger premise and venture off into fast food to find an analogy for HBO because, quite frankly, HBO doesn’t even think it is TV. HBO is HBO. So in my chart above, HBO is high quality, but low volume and high costs. That’s an expensive restaurant burger. In Hollywood, that’s swanky Umami Burger.

All of which is about to change. HBO Max is going to try to add the entire Warner Bros TV and film catalogue, which could be thousands of movies and TV episode. If they pull this off—adding TV series like The Big Bang Theory and Two and a Half Men and movies like Justice League—you’ll get lots of volume while keeping the high quality series of HBO. Which will still be one of the more expensive streaming platforms. This will make them the Starbucks of streaming: high quality and with lots of volume, but costing a fortune. (But the Pumpkin Spice Latte that is Succession is worth it.)

CBS All-Access is Chick-fil-a

Someday, not too far in the future, CBS will have tons of TV episodes for mainstream viewers, ranging from CSI to NCIS to Blue Bloods. Just like now, this lineup will deliberately appeal to “middle America,” not the ballyhooed “coastal elites.” And at $10 a month, CBS All Access will be pretty affordable. And while a lot of folks may not care for CBS, those who do love it REALLY love it, much like Chick-fil-a fans who can’t get enough of their waffle fries and chicken sandwiches.

Apple TV+ is Chipotle

Now we get to the company that kicked off this article. Like Chipotle, Apple TV+ is a bundle of contradictions. It won’t have very much content at launch (only 7 series). And while the shows are certainly expensive, will they be any good? Chipotle is also really high quality, but that aura has been severely tarnished by multiple food poisoning outbreaks.

Like Apple, Chipotle feels pretty affordable when you first buy it. Apple TV+ will feel the same way. At only $5, it’s the cheapest service on this list. But…you will need to have an Apple device to run it when it launches on November. And with phones running up to $1,000 for the latest generation, that’s not cheap at all.

Moreover, you still really won’t get a lot of content when Apple TV+ launches. Potentially, 21 (three per seven series). Using our pricing from above, that means…

Yikes!

The Rest

Free, ad-supported services (Pluto TV, IMDb TV, Xumo, Tubi and so on) will be the Taco Bells and Subways of the streaming wars, really cheap with lots of filler. Showtime is pricey like HBO, meaning it’s the Shake Shack of streamers. Starz is surprisingly affordable, but questionable on quality, meaning it’s probably the Wendy’s of the streaming wars.

Add it all up, and we have our lay out for how each company’s content strategy works out in the streaming wars. With one big “TBD” for Apple because even with the recent announcement, we still have a lot of questions.

(The Entertainment Strategy Guy writes under this pseudonym at his eponymous website. A former exec at a streaming company, he prefers writing to sending emails/attending meetings, so he launched his own website. Sign up for his newsletter at Substack for regular thoughts and analysis on the business, strategy and economics of the media and entertainment industry.)