The Hollywood sign, for so long a symbol of the land where dreams come true, now seems to cast a long, doubtful shadow over Tinseltown’s most recent venture: streaming. With protest signs, cries for fair compensation, and an industry in tumult, one can’t help but wonder: Is the promise of streaming sustainable?
A Historical Deep Dive
In 2007, Netflix leaped from its DVD-rental model to introduce the world to streaming, radically reshaping our consumption habits. This was a seismic shift comparable to the transition from radio to television. A subscription-based model offering an almost infinite library? The proposition was delectable. But it took a mere six years for Netflix to pivot once more, this time producing original content. A strategy that sent shockwaves throughout traditional media houses.
Discovery, NBCUniversal, and Paramount, alarmed by Netflix’s progressive moves, were pressured to build their direct-to-consumer platforms. However, the catch was in the economics of it all. Traditional TV had a straightforward model: commercials fund content. With streaming, monthly subscriptions became the primary revenue stream.
Growing Pains in the Industry
The initial growth numbers for streamers were staggering. Each quarter brought with it an astronomical rise in subscribers. But herein lay a deceptive underbelly: growing subscribers doesn’t necessarily equate to growing profits. The cost of producing original content and licensing others skyrocketed. And while these platforms had amassed subscribers, the average revenue per user was significantly lower than traditional TV models.
Then came the shocker in 2022: Netflix reported its first subscriber loss. An occurrence that many believed was the inevitable canary in the coal mine for streaming. Disney soon echoed this sentiment, further causing ripples of uncertainty in the streaming world.
According to a report by IndieWire, starting in 2023 only Netflix and Hulu seemed to be in the green. Other major players, including Disney+ and HBO Max (Now Just Max), were hemorrhaging money. They all faced the same conundrum: while revenue flowed in, profitability remained a distant dream.
To bridge the chasm between expenditure and earnings, streamers adopted multiple strategies:
Ad-Incorporation: Taking a page out of traditional TV’s playbook, platforms like Disney+ introduced ad-supported tiers. Once Netflix jumped on this bandwagon, it found that these subscribers generated more monthly revenue than their ad-free counterparts.
Tax Write-downs: Some streamers found profitability, ironically, in their losses. For instance, WBD’s cancellation of Batgirl was suspected to be a move to avail tax write-down benefits.
Migrating to AVOD and FAST: AVOD (Advertising Video on Demand) and FAST (Free Ad-supported Streaming Television) emerged as solutions to the profitability conundrum. Brands like Roku and Tubi started offering ad-supported viewing, enticing users with free content. Mainstream streamers saw an opportunity to offload lesser-watched content onto these platforms, earning through ads while also trimming their libraries.
The Way Forward
Today’s streaming landscape is reminiscent of the early days of cable TV, where a plethora of channels eventually led to bundled packages. As more streamers vie for the same audience, will we see a similar bundling of streaming services?
Furthermore, as streamers scramble to appease investors, the industry’s true stakeholders – the writers, actors, and creators – are often left in the lurch, bearing the brunt of the financial tumult.
It’s evident that streaming, in its current form, is not the promised land many hoped it would be. While it offers unprecedented accessibility and a platform for diverse content, its long-term profitability remains shrouded in doubt.
As technological disruptions continue to redefine Hollywood, it’s a wait-and-watch game. For now, both streamers and traditional media must adapt, innovate, and perhaps even collaborate to navigate the tumultuous waters of the modern entertainment industry.
