Streaming services have shaken up the entertainment sector. They have delivered blockbuster bingeable TV shows that boast enormous budgets, killed sales of old media like DVDs, financed award-winning film productions and frightened providers of broadcast television. Now the streaming providers also need to be shaken up because too many of them have thrown too much money at the pursuit of too few eyeballs. The Financial Times explains:
Disney, Warner Bros Discovery, Comcast and Paramount — US entertainment conglomerates that have been growing ever larger for decades — are facing pressure to shrink or sell legacy businesses, scale back production and slash costs following billions in losses from their digital platforms.
Beyond their streaming losses, the traditional media groups are facing a weak advertising market, declining television revenues and higher production costs following the Hollywood strikes.
Netflix stands apart by being profitable whilst maintaining a large customer base. Large price increases also helped Warner to make a small profit from its streaming services during 2023, but at the cost of losing two million customers during the second half of the year. Streaming services inspire almost no loyalty. Analytics business Antenna estimates that a quarter of US consumers have terminated at least three streaming services during the last two years as part of a pattern where they ‘watch, cancel and go’.
Even Disney, perhaps the biggest name in global entertainment, is having to tighten its belt. 7,000 Disney employees were made redundant during 2023, lowering their global headcount by 3.2 percent. However, Disney announced in November they were seeking another USD2bn in expenditure reductions by “aggressively managing its cost base”. Disney’s streaming service has lost USD10bn since its introduction in 2019.
The streaming market is ripe for consolidation. Providers that have lost money so far may be prepared to double down by purchasing competitors. The amounts being lost on streaming are especially remarkable given the extent to which the adoption of streaming was accelerated by the pandemic. However, the pandemic is over. There has never been a better time for smart businesses to use intelligence to find ways to reduce expenditure without impairing revenues or the quality of their output. The alternative is to rely on old-fashioned gambling about whose films and TV shows will prove most popular. Gambling may seem normal within the entertainment industry, but if businesses that have unparalleled knowledge about consumer viewing habits cannot find a better way to increase profitability then they deserve to die.
