Streaming was touted as the mecca for the major media companies. This was especially true for the entertainment companies, i.e. those who produced movies and television shows.
The entire process was kicked off by Netflix. In the early days, nobody knew how valuable this would be. The movie studios gave their content to Netflix on the cheap. Over time, they woke up to the value.
Within a few years, the cost of content skyrocketed. This put Netflix in a bind. Fortunately, it had started to create some content on its own, something that helped to offset some of the costs. During that period, profits were still rolling in.
This caught the attention of the major studios. Why should they give the profits to Netflix? They wanted their piece of the action.
Streaming Was Going To Be The Future
Streaming offered hope.
The industry was suffering due to cord cutting. People were closing their cable and satellite packages, causing a reverberation throughout the industry. To date, more than 25% of the near 100 million cable subscribers in the US have moved on. They no longer pay for the service.
When we look at the revenues lost, it becomes a large number. This, of course, affected the fees that channels were able to garner. We saw the best business model in the world start to break down.
Netflix showed another path.
By going direct, with shows that could be viewed on demand, charging a modest fee, and having no commercials, many flocked to the service. It had acquired a couple hundred million subscribers, something that the other media companies took note of.
It was also generating a profit. Here is where the belief of the Golden Goose entered. Traditional companies were losing their revenues due to cord cutting. This was the way to get them back.
Unfortunately, it did not work out that way.
Streaming Is Eating Their Lunch
Streaming has cost the traditional broadcast companies billions of dollars.
They turned what was a lucrative cable/satellite model into something that is going to destroy them if left unchecked.
Here is a headline from this Techspot article:
The Financial times reports that some of the biggest entertainment companies will post more than $5 billion in losses from their streaming services for 2023. Disney, Comcast, and Paramount streaming divisions will aLL end up in the red for the year, and Warner Bros Discovery managed a small profit. However, investors are already clamoring about downsizing and spinning off parts of the business.
This is a kick in the teeth.
How could these companies lose so much money? For one, they own a great deal of the content they are offering. This means they do not have the same costs that Netflix does.
For example, Disney has one of the largest movie and television libraries on the planet. It bought Lucas and Marvel in addition to having almost 100 years of content.
Yet, in spite of this, to date has suffered more than $11 billion in losses for its streaming service. Each year there is the promise of profit, something followed up with more loss. In Q4, the latest reporting, the company lost $300 million during that period. That was down from the $512 million in Q3.
From these numbers, it is easy to see how all of the services could amass a multi-billion bill.
Advertising
One of the keys executives are looking at is increasing revenue.
This has resulted in price increases. At the same time, advertising is being added in an effort to stop the sea of red. To be fair, Netflix is going in this direction also.
There is only one problem.
Customers are finding they now have a multitude of streaming services, each costing between $10 and $20 a month. On top of that, they are hit with advertising, something that was an advantage over the previous cable packed. Finally, to find something is a nightmare since one is required to make sure he or she is on the right application.
In short, the user experience appears to be declining.
Could all of this lead to a streaming apocalypse?
This is certainly a possibility. We will see if these companies can turn things around. One of the issues is they are in horrific shape to begin with. Paramount, for example, is about to be purchased, right after having its debt downgraded. Disney made headlines with its huge losses on its feature films in addition to streaming.
All the while, Big Tech is lurking. We have written about how Amazon is looking to penetrate this market deeper. They are making moves that will pit them against these movie and television companies.
The advantage is none of them are able to fund the operations through the profits from AWS.
We are going to see an interesting time over the next few years. This is an example of an industry that is being completely altered before our eyes.
While we might not know what it will look like in 2-3 years, we do know it will be vastly different.
Posted Using InLeo Alpha