The streaming economy is broken

The streaming landscape has settled after months of storms. Not for the better.

The streaming industry is in economic crisis, as predicted months ago. Reductions in budgets for new content, rate increases, and the elimination of features like account sharing that were once essential to the experience are increasing.

However, several analyses confirm this sector situation, which could worsen in the coming years.

From fame to anonymity. In ‘The Broken Economics of Streaming Services: A Statistical Explanation’, analyst Daniel Parris reveals many streaming services’ dead end. He describes how platforms grow and maintain themselves, which requires resources that not everyone can afford. Paramount, one of the most iconic film production companies of the 20th century, is the latest media conglomerate to enter the streaming business with Paramount+.

The platform is financially struggling and lacks the relevance of Netflix.

Long battle to maintain. In a saturated landscape where the average viewer cannot use all platforms, Parris says companies must maintain their audience without significant portions of it migrating from one to another to grow. Netflix has won the streaming war because of its eclectic and varied catalogue, which appeals to tens of millions of customers from diverse backgrounds.

Streaming has become a long-distance race where you must produce constantly to survive. Netflix has twice the catalog of its closest competitors because of that.

Show me money. These numbers can only be reached with a checkbook. Amazon’s Prime Video spent $10 billion on content in 2022, while Netflix spent 18 billion. Netflix cut its spending once it reached the top, and Amazon, with series like ‘Citadel’ or ‘The Rings of Power’, may have multiplied its own, but the proportions remain.

People leave. The problem is that services are so varied and expensive that many platforms struggle to retain audiences, which is the real indicator of success (and future issues). Second Measure found that customers stayed on platforms like Universal-owned Peacock and Apple TV+ for about a year. Netflix retains users for 50 months on average.

The tail-biting snake. Only more appealing content can increase audience retention in this situation. Viewers want essential content to fill their free time. Content matters more than platform, whether it’s ‘Stranger Things’ or ‘Ted Lasso’. Only Netflix can afford to make monthly proposals like this, but the excess catalog disperses new releases. The new season of ‘The Squid Game’ is just another series in an ocean of offers. Paradoxically, streaming’s fight for survival (extra production) has suffocated it.

Temporary fix. Can this uzumaki of inevitable productions that sink platforms into excess be stopped? Production is one way to reduce costs. Some calculations show that platforms are spending more than ever to expand their catalog, but there are fewer superproductions. In fact, it supports what we just said: they want more series that keep viewers coming back, not an unforgettable and costly eight-month impact like Warner’s.

Entertainment cryptocurrency. In a 2023 Vulture article, Steven Soderbergh sums up the industry’s contradictions and near-term uncertainty: “The entire industry has moved from Newtonian economics to quantum economics, where massive platform success doesn’t increase revenue. The streaming subscription model could be the entertainment industry’s cryptocurrency.”

Unknown terrain. The situation is complicated: a $200 million production may not make a profit, and lowering platform series and film budgets may not solve it. Many industry figures told Vulture that Netflix has transformed the industry into something unrecognizable. The audiovisual industry has been exploring new territory for years. Which undoubtedly creates exciting phenomena and many business opportunities. Also, bankruptcy.

The streaming economy is broken

By nr39r

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