Karina Tietje’s Post

✅🖥️ New York Times (6/22): “Streaming has long been hailed as a promising business, because companies like Netflix can add additional subscribers at little extra cost. The more paying subs a service has, the more the company’s costs can be spread out over a large base, lowering the cost per sub. But those want lots of options, and the costs of making enough programming can be enormous. As a result, a streaming service’s profitability depends in large part on how many paying subs are needed before those TV shows and movies become cost-effective. There was a time when industry execs hoped that number might be as low as 100MM. But now the consensus among many of the executives interviewed is that the number is at least 200, and possibly more. “If you’re going to be a full entertainment service with live sports and tent-pole blockbusters today, 200MM is a number that can give you the scale with the hope for growth over time,” Amazon (execs have) said. Bob Chapek, Disney’s CEO until 2022, also agreed that 200 was the number that meant “you’re big enough to compete.” Netflix has reached that, and then some, with about 270MM paying subs. Moreover, those pay an industry-leading average of more than $11 per month. Netflix is highly profitable, with operating margins of 28 percent. In the first quarter of 2024, Netflix reported revenue of $9.4B, and $2.3B in net income. No one else comes close. Disney and Amazon are the only other streaming services with more than 200MM subscribers.” ⬇️ #streamingtv #ctvadvertising #avod #svod #ott #fast #upfronts

🏚️Streaming’s Financial Strain: Legacy media giants like Disney, Paramount, and Warner Bros. Discovery are facing significant losses in streaming, questioning the sustainability of the current model. 📺Subscriber Threshold: Executives believe that to be profitable, a streaming service needs at least 200 million subscribers. Only Netflix, Amazon, and Disney+ (combined with Hulu) have crossed this mark. 💲Content Costs & Risks: Streaming giants like Netflix and Amazon are investing billions in original content, with shows costing up to $50 million per episode, underscoring the high stakes and risks involved. 🏈Live Sports as a Lifeline: The soaring costs of live sports rights are a critical battleground. Streaming services are betting big on sports to attract subscribers and reduce churn. 🦦Advertising’s Role: With ad-supported tiers gaining traction, streaming platforms are leveraging targeted advertising as a crucial revenue stream. 💰Market Consolidation: The future may see only a few dominant streaming services (e.g., Netflix, Amazon, Disney/Hulu), while smaller players may shrink, merge, or exit the market. 🔄Bundling as a Strategy: Smaller streaming services are exploring bundling as a way to increase value and attract subscribers, though the economics remain complex. 🪪Sony’s Unique Approach: Unlike competitors, Sony has adopted a profitable “arms dealer” strategy by licensing content rather than competing directly in general streaming. https://lnkd.in/dkwtGpqf

Media titans, including John Malone, Brian Roberts, Barry Diller, Ted Sarandos, and Mike Hopkins, share their predictions on the future of streaming. Here are some of the key insights offered by them: ➤ The number of subscribers needed to be successful is at least 200 million, with only Netflix, Disney, and Amazon having reached that milestone. ➤ Spending on content will remain significant, with some shows costing well over $100 million per season, to combat churn that is as high as 7% for some of the smaller streaming services. ➤ More of the content spend will be devoted to live sports, resulting in bidding wars unlike anything experienced before in the media industry. ➤ Companies are likely to continue raising prices aggressively on ad-free tiers in an effort to drive consumers to ad-supported versions. ➤ Bundling may help reduce churn but will lead to a decline in average revenue per user. ➤ Only three or four streaming services will survive in the long-term. Read more about the future of streaming in The New York Times:

Amazing long form article on the streaming media at a crossroads, with industry titans like Brian Roberts, John Malone, and Barry Diller recognizing the unsustainable nature of current business models. Here are the key takeaways: 1. Legacy media giants like Paramount, Warner Bros. Discovery, and Disney are struggling financially, while disruptors like Netflix and Amazon thrive. 2. The magic number for profitability in streaming is at least 200 million subscribers, with Netflix leading the pack. 3. Costs for content production and sports programming are soaring, creating significant financial pressure. Opportunities: 1. Bundling services can attract price-sensitive consumers and reduce churn. 2. Advertising-supported tiers offer new revenue streams and potential growth. 3. Licensing content, as demonstrated by Sony, can be a profitable strategy without running a streaming service. Challenges: 1. Achieving profitability requires massive investments in content and sports rights. 2. High churn rates and subscriber acquisition costs are ongoing issues. 3. The industry may consolidate, with only a few major players likely to survive. The future of streaming hinges on balancing quality content with financial viability. Innovation and strategic partnerships will be crucial for navigating this evolving landscape. #Streaming #MediaIndustry #Netflix #AmazonPrime #Disneyplus #WarnerBros #Paramount https://lnkd.in/gu-pY6ew

The Future of Streaming (According to the Moguls Figuring It Out) Who will survive? Die? Thrive? And how? We talked to nearly a dozen top media executives and asked them to predict what lies ahead. Paramount, the media empire controlled by Shari Redstone, lost $1.6 billion on streaming last year. Comcast lost $2.7 billion on its Peacock streaming service. Disney lost about $2.6 billion on its services, which include Disney+, Hulu and ESPN+. Warner Bros. Discovery says its Max streaming service eked out a profit last year, but only by including HBO sales through cable distributors. Streaming service’s profitability depends in large part on how many paying subscribers are needed before those TV shows and movies become cost-effective. There was a time when industry executives hoped that number might be as low as 100 million. But now the consensus among many of the executives interviewed is that the number is at least 200 million, and possibly more. When cable TV was in its heyday, 1.5 to 2 percent of subscribers churned monthly, abandoning or suspending their service. The average churn across all streaming services is more than double that, according to data from analytics firm Antenna, with the churn rate of some smaller streaming services, like Paramount+, as high as 7 percent. Only Netflix has a churn rate below 4 percent.

The streaming industry is witnessing a shift as major media executives, including The Walt Disney Company's Bob Iger and Warner Bros. Discovery's David Zaslav, praise rival platforms like Netflix and Amazon. This marks a truce among streaming giants, reflecting changes in industry dynamics where profitability and sustainability are gaining importance over subscriber growth alone. Previously, platforms engaged in overspending to attract top producers and secure sought-after shows. Now, partnerships and bundled offerings are emerging trends as companies seek to address profitability challenges and changing consumer behaviors. This shift suggests a move towards consolidation in the industry, with Paramount and Warner Bros. Discovery being key players in potential merger talks. Follow Amanda Newman to stay up to date with technology. https://lnkd.in/dhpxcpDn

My last post on Prime Video & Amazon MGM Studios vs Netflix got a lot more feedback than I expected. Here is another interesting article titled "The Broken Economics of Streaming Services: A Stats Explainer". It starts off by going into Paramount Pictures current situation... the company's debt was downgraded to junk bond status coinciding with the loss of $490 million dollars in the 4th quarter of 2023 even with 71 million Paramount Plus subscribers. The article talks about the problem being not too much content but too little. Netflix has 2x the number of TV titles compared to Hulu and Warner Bros. Discovery MAX. In essence Netflix has replaced linear tv by having something for everyone. The other streamers are lagging because they don't have enough content to keep everyone interested. All the while Wall Street is complaining about the losses piling up. This reminds me of the old dotcom days of growth at any rate and losses "don't matter.....until they do". The high interest rate environment has now made investors care about the losses these streamers are piling up. The article ends by stating: This economic reality presents streaming services with three options: Implode: Like Paramount.  Produce Less Content: If you produce less content, you'll lose less money (you heard it here first!). That said, if you spend less, you'll acquire fewer users and retain a smaller share of paying customers. Once this happens, Wall Street will write you off as a failure, your stock will tank, and you'll be fired—just like the head of Paramount. Produce Cheaper Content: Not all content is created equal. Some content has broad appeal, and some properties are cheap to produce. As the streaming industry evolves, we'll see increased investment in inexpensive concepts with wide appeal.  https://lnkd.in/gD6ECRHC

From the NYT: Streaming has long been hailed as a promising business, because companies like Netflix can add additional subscribers at little extra cost. The more paying subscribers a service has, the more the company’s costs can be spread out over a large base, lowering the cost per subscriber. But those subscribers want lots of options, and the costs of making enough programming can be enormous. As a result, a #streaming service’s profitability depends in large part on how many paying subscribers are needed before those #TV shows and movies become cost-effective. There was a time when industry executives hoped that number might be as low as 100 million. But now the consensus among many of the executives interviewed is that the number is at least 200 million, and possibly more. “If you’re going to be a full entertainment service with live sports and tent-pole blockbusters today, 200 million is a number that can give you the scale with the hope for growth over time,” Mr. Hopkins of Amazon said. Netflix has reached that, and then some, with about 270 million paying subscribers. $50 Million an Episode, Over and Over The costs of attracting — and keeping — those millions of customers is no cheap feat. Overall, Netflix has said it will spend about $17 billion this year on programming, about what it did before last year’s Hollywood strikes depressed production. “It’s a tall order to entertain the world,” Mr. Sarandos of Netflix said. “You have to do it with regularity and dependably.” For Netflix, $17 billion represents only about half of its total revenue. But almost no competitor can match that spending level, the executives said, except for maybe Amazon. Not all of those pay off. But when they do, the impact can be huge, like wildcatters when they hit a gusher. Play Ball Adding to the cost pressure, the executives said, is the soaring cost of #sports programming. Even in the bygone era of traditional television, the broad appeal of sports was obvious. But that was before streaming and the arrival of the deep-pocketed #tech giants. The appeal of live sports is both unique and twofold: They attract new streaming subscribers and reduce churn since viewers want to watch sports live. It is also a big draw for advertisers as streaming services look to grow their ad businesses. #Advertising to the Rescue? “It’s a nice way to get price-sensitive consumers,” said Mr. Chapek “Heavy users will still come and pay the higher monthly fee.” Mr. Chapek acknowledged that advertisers covet — and will pay more for — mass audiences. As a result, the streaming services have a strong incentive to produce programs with broad appeal instead of more niche content, including some of the kind that generates critical acclaim. Who Will Survive? “Can your current business be a successful player and have long-term wealth generation, or are you going to be roadkill?” Mr. Malone mused. “I think all the small players will have to shrink down or go away.”

I Will Survive « Who Will Survive? How many streaming services will consumers support? That was one of the great mysteries of the nascent streaming world, and the answer is coming into focus: not very many. “Can your current business be a successful player and have long-term wealth generation, or are you going to be roadkill?” Mr. Malone mused. “I think all the small players will have to shrink down or go away.” A recent Deloitte study found that American households paid an average of $61 a month for four streaming services, but that many didn’t think the expense was worth it. That suggests the once-unthinkable possibility, many of the executives said, that there will be only three or four streaming survivors: Netflix and Amazon, almost certainly. Probably some combination of Disney and Hulu. Apple remains a niche participant, but appears to be feeling its way into a long-term, albeit money-losing, presence, which it can afford to do. That leaves big question marks over Peacock, Warner Bros. Discovery’s Max, and Paramount+. »

I'll admit it. I subscribe to Netflix, Amazon, Disney, Hulu, Apple, Peacock, Max, and Paramount+. But the average American subscribes to 4 streaming services at an average of $61/month. Which is still a lot! There is a true streaming war, as these players fight for our attention. To survive, players will need at least 200 million subscribers (something only Netflix, Amazon Prime Video and Disney+ combined with Hulu have done) They will need to spend $50M for blockbuster hits, over and over. And they will need sports, which both attract new subscribers, and retain (at least for the duration of the season) subscribers who want to watch their teams live. There's not a lot of room for price increases, especially after the recent round--so many are looking at ad revenue as a source of growth. According to this excellent article, which anyone interested in streaming should read, the rise of ads may lead streaming services to provide lower prestige, popular content (think police procedurals and hospital dramas) mixed with some big sports events. Sounds like what we used to have with Cable. 📝 James Stewart, Benjamin Mullin #litrendingtopics #streamingwars #subscriptions