The proliferation of streaming services has left many consumers scratching their heads, wondering just which ones are worth the monthly subscription.
It can be equally puzzling for investors who are seeking to cash in on the consumer trend away from cable companies and toward streaming services. They need to keep up with who’s hot, who’s not, and who’s merging with whom.
Streaming services are focused more on profitability and less on churning out huge amounts of content.
Subscribers are paying more for content and higher premiums for ad-free programming.
Mergers and acquisitions may further reduce the amount of new programming and raise prices.
How will consumers and investors navigate the volatile media landscape? Stay tuned.
How it all began
In 2013, Netflix (NFLX) launched the first wildly successful streaming series, House of Cards, which started the landslide of original content from competitors like Hulu, owned by Walt Disney (DIS), and Amazon’s (AMZN) Prime Video.
By 2020 and with the onset of the COVID-19 pandemic, which kept us all indoors for nearly two years and changed the way many of us lived our lives and watched TV, streaming services were on fire. What was coined the “peak TV” era became a second golden age of TV.
There was something engaging and entertaining available to watch any time of the day or night. Series such as The Crown and The Handmaid’s Tale became mega hits. And if episodic TV wasn’t what you were looking for, there were old movies and remakes, shows you’d missed on their first run, plus new movies and other new programming.
TV binging was all the rage as the streaming wars brought new entrants into the field:
Disney rolled out Disney+
NBC Universal parent company Comcast (CMCSA) added Peacock
And streaming was cheap. Providers were offering ad-free, subscription-only models that cord-cutting consumers mostly ate up, piling multiple subscriptions upon each other. Everything seemed so good. Until it wasn’t anymore.
Investors happened. All these streaming services were part of publicly owned behemoths that had devoted hundreds of millions of dollars to build up their subscriber bases and lure big-name writers to their pools. Many either saw profit margins sink or were swimming in the red.
Strikes in 2023 by the Writers Guild of America, the Alliance of Motion Picture and Television Producers, and Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) shut down production on live shows and content creation for months, which also figured in the financial picture.
Writers and actors hammered out new contracts that gave them higher wages and residuals, minimum staffing requirements for shorter streaming shows and programs, and artificial intelligence (AI) protections. That drove streaming services to budget higher costs for content creation.
In response, seven of the top nine streaming services raised prices by as much as 20% for basic and ad-free plans:
What’s old becomes new again
Netflix, Paramount, Max, and all the others turned their attention to selling viewership against ads. That means more popular shows are being kept, while independent shows with limited audiences—which made streaming services so attractive to begin with—are being sacrificed.
It was bound to happen
Although it was fun for all while it lasted, it couldn’t go on forever. Stemming the escalating costs to produce and acquire shows for streaming services was only one component of the business model. Consumers were another.
In a 2020 study amid the streaming wars, Deloitte saw the writing on the wall and cautioned streaming services companies about viewer overload: “There is growing frustration in trying to navigate the flood of streaming choices, all while trying to manage costs.”
Consumers were piling on services largely because they weren’t able to go to theaters, sports arenas, or restaurants after the pandemic shuttered most places. It wasn’t uncommon for households to have subscriptions to, say, Netflix, Disney+, and ESPN+, catering to the needs of all members of the family.
Further, younger generations were looking to more social and interactive forms of entertainment, according to the Deloitte study. “For millennials and Gen Z, TV and film are no longer the primary form of media,” the company reported. “These cohorts are just as likely to engage with highly targeted, user-generated video content and with interactive and immersive video games that often include social experiences.” User-generated video content, such as TikTok, Meta (META)-owned Instagram, and Alphabet’s (GOOG) YouTube have been taking a big bite out of users’ time.
Consumers have become picky, choosing which services they want and use most and dumping the others. Some consumers are considered “serial churners” because they buy in for a certain program or sports programming and then drop the subscription afterward.
The growth of streaming gave consumers more choices than ever before as providers bundled services and increasingly turned to licensing shows—and giving some, such as Suits, new life after Peacock licensed it to Netflix. Even long-forgotten shows such as Six Feet Under and Band of Brothers got second lives on Netflix.
But as prices have risen, industry experts expect demand to tumble, leaving some streaming services in weaker financial health and potentially sparking a series of mergers and acquisitions. (In January 2024, Warner Bros. Discovery was in talks to buy Paramount Global.)
For investors, picking favorites is no easy task. Netflix is its own animal in the public markets, but most of the others are owned by companies whose mission isn’t just streaming but could include amusement parks, online sales, and technology products.
Although the hot streaming wars for a share of viewers’ eyes may have peaked, keeping subscribers and adding new ones is challenging as streaming services continue to juggle the high costs of programming.
The bottom line
Streaming companies are still focused on compelling content—the surest way to keep subscribers and enlist new ones. But they also must find ways to produce more content and find more novel ways to incorporate advertising, gaming, and social media. The evolution has already begun.