Fewer shows, higher prices, more ads: the new reality of streaming is dawning on consumers
Lesson summary
Hi there everyone, I’m Jeff and this is Plain English, where we help you upgrade your English with current events and trending topics. If this is your first time listening, welcome! Here at Plain English, we trick you into improving your English. You think you’re listening just to learn about the world, but what you’re really doing is improving your vocabulary and your listening skills. We’re sneaky that way.
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Today’s topic: the party is over in streaming, as the big media companies are discovering a new spending discipline. We’ll talk about what that means for you and me—the consumers. In the second half of the lesson, I’ll show you how to use the English expression “all of a sudden” and we have a song of the week. Let’s dive in.
Spending discipline comes to streaming
Paramount+ spent $30 million to produce a single episode of “Yellowstone.” Netflix released 891 Netflix originals—not episodes, we’re talking movies and original series—eight hundred ninety-one!—in 2022. Disney opened its beloved library of films for the first time a few years ago. Oh, and all of this comes without commercials. Not happy with the streaming service you’re on? Just cancel and go to one you like better. You’re in charge.
There’s no doubt that on-screen entertainment today is far better than it was in the age of linear television and Blockbuster rentals . But this benefit has been subsidized by a firehose of cash: the streaming industry has sprayed the film and TV industry with money.
But all of a sudden , the flow of money is starting to dry up . And that’s not good news for you and me, the consumers.
Disney launched its streaming service, Disney+, in late 2019. It started, in the U.S., at $6.99, a lot cheaper than Netflix. Its low price and its familiar hits—Star Wars, Marvel, all the animated movies—they h elped Disney grow to a peak of 164 million subscribers after just three years—it’s over 200 million subscribers now if you count their other platforms. It’s a great top-line growth story.
The problem is, the growth isn’t profitable: they make a lot of money, but they spend even more. Disney loses money every month on Disney+ and its investors are growing frustrated. Investors are asking: If Disney can’t make a profit with 200 million subscribers, then when can it make a profit? Costs need to come down. They are just spending too much on content. Disney’s new CEO has promised to slash spending across the company, but especially in its streaming service.
It’s the same story at Paramount, the service that makes “Yellowstone.” The streaming service Paramount+ is losing $500 million per quarter—that’s a rate of $2 billion a year. Losses in streaming are wiping out profits in the whole rest of the business. Thanks to streaming, the company’s earnings fell 99 percent last year. That can’t continue.
How are they going to right the ship ? Disney, Paramount, HBO Max, and others are following a consistent playbook consisting of four tactics: they’re raising prices, they’re introducing advertising, they’re pulling back on new content, and they’re removing older content from their libraries.
Start with prices. Disney raised its U.S. price from $6.99 to $11.99, a big increase. Paramount is going from $10 to $12 for its most popular tier. Netflix is not raising prices. But as you heard earlier this year , it’s planning a crackdown on password sharing . And that crackdown is starting to happen now, at least in the U.S. So while the monthly bill doesn’t increase, Netflix is hoping more people pay their own bills—which is like a price increase in disguise.
The second idea is to introduce advertising. This does two things. First, it adds an additional source of revenue to the streamers from advertisers. But it also retains some customers who might not be able to pay the full bill. If you don’t want to pay the full price, you can pay a lower price if you’re willing to watch ads. This helps streamers retain some customers that they might have otherwise lost. Disney+ and Netflix are employing this strategy. But for consumers, this is an uncomfortable reminder of what we hated about television of the past: too many commercial interruptions.
Third, streamers are pulling back on new content. Just a few years ago, streamers wouldn’t think twice about green-lighting expensive new shows. But now, the big streamers are all saying they’ll spend less on content. HBO Max, for example, decided not to produce a highly anticipated series called Demimonde, saying it was too expensive.
The CEOs of Paramount and Disney have said they’re going to spend less, too; Paramount said it thinks 2023 will be the peak spending year in streaming. Netflix said it’s being more careful about spending on new shows. The streaming giant is releasing “only” 49 titles in 2023, a decline of about 50 percent over last year. Still, that’s 49 feature films, over and above new series.
The cuts are hitting the writers, too. The creatives who write the jokes and the screenplays are on strike over the stinginess of the streaming giants.
The fourth tactic is to remove shows from the library. New shows attract subscribers and keep subscribers from cancelling. Subscribers like the shiny new object, the new show that catches their attention. But a lot of subscribers like the library—the big selection of old shows and movies.
Streamers, though, have to pay rights and royalties for these old shows. And that’s another area they’re looking to trim. HBO Max and Disney+ have both started dropping movies and shows from their libraries, reducing the overall selection. On Netflix just a few years ago, only about a quarter of the content was produced by Netflix. Now, it’s over 60 percent. That’s from all the new Netflix content, but also from trimming its library of non-Netflix originals.
Ouch. The party is definitely over. For us, for the consumers, what happens? Our prices are going up. We might have to watch ads. We’re getting a smaller selection of new shows. And if we’re not happy with the new shows, we have fewer older shows and movies to watch.
New concept: watch what’s on, for free, with ads
In a sign that things have possibly come full circle, Warner Brothers, which owns HBO, is launching a streaming ad-supported linear channel that you can watch on streaming devices like Rokus. So it’s totally free, but you have to sit through ads and you have to watch what’s currently on—you can’t choose what to watch. It almost sounds like over-the-air television, right?
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