Broken Streaming Dreams
Streaming has been good for viewers and bad for business, but the bill has come due.
Streaming has been pretty great, right? You can watch TV and movies without leaving your living room. While we used to be constrained by what we could physically own or rent now we can get nearly everything with a click of a button. Truly, it has been a wonderful time.
Except, now the bill is due.
Not the steadily rising bill for the streaming platforms, although that is happening, but the macro bill. The bill that is being paid by both the creators, studios, and soon the audience as well.
The combination of low interest rates made cash “cheap.” Wall Street was rewarding Netflix for their “disruption” the Hollywood model. Soon every studio felt the pressure to follow Netflix and launch their own streaming service.
Then something totally unprecedented happened, a global pandemic. Movie theaters were shut down and studios started releasing titles on their platforms. This created a lot of buzz, drove up some subscription numbers, and raised stock prices.
The answer was to ramp up production on more streaming shows and movies to continue to increase number of subscribers and raise the stock evaluation.
Then last year the Federal Reserve starting raising interest rates and the whole house of cards started to wobble. When Netflix reported in April 2022 that they lost subscribers the party was over. The waiter brought the check and it was time to pay the tab.
Nothing lasts forever and sooner or later the ever-growing growth was going to hit a ceiling.
What went wrong? Well, that part is easy. Streaming was always suppose to be a supplemental business and it became a primary one.
Producing movies and television is very expensive. Paying for the license to have movies and television on your platform is very expensive. The streamers were spending more money to produce than they ever could get back from charging $9.99.
Streaming should have been a way to address that people were canceling cable and buying less movies on Blu-ray. Instead, because of Netflix, studios started making it their primary business. It was an incredible self-own on their part.
What happens next? There will likely be a course-correction. Last year studios got the message and started keeping films in the theater for longer. Massive hits like Top Gun: Maverick and Elvis stayed longer than the 45 days and ended up making $718M and $151M at the domestic box-office. Occasionally, you might see a film leave theaters early but that is only after it has completely stalled out.
As for streaming television I expect three things to happen 1) subscription prices will rise, 2) less shows will get produced, and 3) streamers will consolidate. Streaming is here to stay and I think those three things happening will be home it is able to do it.
As for creatives, well we will see how the WGA strike shakes out. I think that the writers will “win” but I’m anticipating a long strike. In the end there will just be simply less shows being produced.
I don’t mean for this to sound pessimistic at all. I also don’t mean to come across like I don’t like streaming, I’m a big fan of it. All I’m saying is that streaming’s “roaring 20’s” has come to an end. There are lessons to be learned so studios can continue to stay in business and provide audiences with the shows and movies that they love for a long time.
Also, when it comes to Hollywood every ending leads to a new beginning. If there is one industry capable of reinventing themselves and adapting to the changing landscape it’s Hollywood. They’ve done it before and I’m guessing they will do it again.