Streaming media: key takeaways and challenges

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

Great article + summary of the streaming environment.

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:

Good article, but the folly continues. As I wrote two years ago, updating prior posts: The Great (Streaming) War of Stupid Value Propositions -- Continued! ...the value proposition for flat-rate all-you-can-eat streaming sucks. ...They continue making an offer that is quickly refused or cancelled, to a finite number of streamers who want a full range of viewing, but with limited wallet to share among competing offerings -- thus satisfying few. This is not a problem of user behavior, or of competition, but of collective industry blindness to a failed pricing model. Few want all they can eat! We can't eat that much! We want only what we want, and don't want to pay for more. Instead, all streamers and consumers could share a much larger pie, with much higher shared value all around. Experiment with more win-win value propositions -- set a fair, bundled (volume discounted) price -- for however much or little we want each month. Offer a fair value proposition so we can subscribe, stay, and watch as we like -- not pay a flat rate every month even when we get no value at all. https://lnkd.in/eD4wfx45

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

✅🖥️ 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

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+. »

🏚️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

The future of streaming is posing challenges for mid-level platforms as they strive for profitability in a competitive landscape. With experts suggesting a subscriber base of 200 million for financial success, only three exceed this threshold, notably Netflix. This raises the question: What strategies will others adopt to thrive? Bundles and licensing appear to be the primary solutions. I respect the hybrid approach #AMC is bringing to it, licensing to competitors like #Max and #Netflix. They've shown through recent experience (admittedly limited) that this strategy can highlight their content and drive subscriptions to AMC+. Is there a different future for the niche market and mid-level apps?

Netflix: 💵Continues to dominate with revenue growth and subscriber expansion. Operating margin and profit increased, with plans to further monetize through advertising and gaming. NBCUniversal (Peacock): ↗️Experienced substantial subscriber growth but still posted significant losses in 2023. Expects to improve profitability in 2024 by focusing on revenue growth rather than standalone profitability. Walt Disney: 🔀Despite narrowing losses, Disney faced challenges with subscriber fluctuations, especially in its core Disney+ service. Strategic initiatives aim to achieve profitability by the end of 2024. Warner Bros. Discovery: 🇪🇺🇩🇪🇫🇷🇮🇹Achieved a small profit in its streaming division for the first time. Focuses on international expansion and content refreshment to drive growth and profitability. Paramount Global: 💸Showed improvement in narrowing streaming losses, focusing on revenue growth and operational efficiency. Management expects domestic streaming to become profitable in 2025.