Every major entertainment company now has a streaming service, from Disney+ to Paramount+ to Apple TV Plus. When it comes to absorbing media, today's viewers have many options across multiple services. Even though many of these services have a plus in their name, the fact that most popular shows and films are fragmented across different services often causes viewers to feel like a minus. The realities of running such a business are now being revealed.
It all began with Netflix. Reed Hastings and Marc Randolph launched the company in 1997 as a mail-based DVD rental service. The company's products evolved to include internet-based video-on-demand streaming. By 2013, Netflix had begun developing its original content, beginning with Kevin Spacey's House of Cards. Netflix had over 230 million customers worldwide by January 2023. The mail rental turned streaming platform has been an enormous success - and with every big hit, some want a piece of the action.
With the rise of Netflix came competitors Amazon Prime Video, Disney+, HBO Max, and more. These different media companies have created their own distinct platforms, but they all share the same core goal. Each streaming service is intended to provide audiences with content they cannot get anywhere else that compels them to pay for a monthly or yearly subscription. To this end, each product produces and creates exclusive content that viewers can only find on its service.
Take Disney's The Mandalorian or Amazon Prime's The Boys, for example. The idea is that viewers who are already subscribed will check out their originals, like them, and stay subscribed because the service provides something they enjoy. Non-subscribers get enticed to purchase a subscription to check if a show or film they may have heard about is good. Either way, new subscribers are folded into the streaming service and thus become customers who pay monthly for access to their favorite television shows and movies.
Before Netflix revolutionized how people consume television, most purchased or rented DVDs or Blu-rays to watch movies and shows. While not as convenient, there was a certain undeniable charm of looking through rows of movies at the video store for the perfect watch. A monthly income stream from millions of customers brings these media companies a lot more revenue than simply selling them as DVDs as their primary content distribution model once was.
This experience has been eliminated for the modern content consumer, with the closest experience being searching through Netflix's catalog for something to watch. The key here is that if you're scrolling through Netflix's backlog, you've already paid for a subscription. Simply walking into an old-school video store like Blockbuster didn't require a fee, and even if you bought or rented something, it was a one-time charge. Instead of making money off of a customer's singular purchase, streaming services allow companies to sustain a continuous revenue stream. This shift in business model is excellent for companies but could be better for consumers. You do not truly own something if access to it is provided through a subscription model.
It's one thing to get licensing to old series and films to build a backlog, but giving customers unique material keeps them subscribed and paying. This is why Amazon and Netflix invest heavily in high-profile programs like The Lord of the Rings: The Rings of Power and Stranger Things to retain customers by giving them cinematic entertainment in their living rooms. Entertainment companies understand they must provide material you cannot find elsewhere to maintain their steady income flow.
This model is effective, as Netflix, Amazon Prime Video, and Disney+ have over 100 million subscribers. Is this sustainable? Although reckless spending has been the norm in the streaming wars, the cracks in this business scheme are now rearing their ugly head.
In early 2022, Netflix reported they lost around 200,000 viewers, their first decline ever, the announcement of which tanked their stock price by 35 percent. As a result, Netflix announced efforts to prohibit users from exchanging passwords and benefiting from free accounts. The company also laid off 450 employees and, by June 2022, had lost almost one million subscribers.
Similarly, Disney+ reported a loss of 2.4 million users, attributed to losing Indian Premier League cricket streaming in India. Uniquely, in HBO Max's case, content deemed underperforming has been removed from the service and used as a write-off as a cost-saving measure.
Across the board, streaming services are losing money and subscribers. The current economic state of the world is partially to blame. It's hard to justify paying for Disney+ at twelve dollars a month when things like eggs are reaching $10 per carton lately. Also, if a company cannot afford to produce mass amounts of content, the people who would have viewed said content might consider unsubscribing from a service.
Also, the shotgun blast method of producing mass amounts of original content catered to all audiences has caused many companies to hemorrhage money. It's no surprise that Disney and Netflix want to reduce their releases. Companies are wrestling with the need to continue to lock down subscribers but now do so under a tighter and more restrictive budget.
So now, consumers are faced with seemingly unending streaming services, all attempting to grab the rights to older content to pad their catalog while simultaneously trying to create content for global audiences at the lowest price possible.
Audiences seem to be opting out of the streaming battles and cancelling their memberships rather than figuring out where their favorite movie is streaming this month or being bothered to check in every thirty days on their home wifi, as Netflix is requesting users to do to curb password sharing.
It's tiresome for the customer, who gets less out of a membership compared to six years ago when Netflix had everything people wanted to see. Corporate greed has created an unsustainable ecosystem similar to conventional cable, with many channels competing for your attention and money but with the additional hurdle of having to do so with lessening resources.
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