The media industry is undergoing a significant transformation driven by the rise of streaming platforms, but profitability remains a major challenge for many studios. Streaming disrupted the traditional economics of the media sector, and it’s still uncertain whether it represents a sustainable long-term business model.
Legacy media giants such as Disney, Warner Bros. Discovery, Paramount, and NBCUniversal initially rushed to compete with Netflix by investing heavily in original content. However, the subscription-based streaming model proved to be different from the ad-revenue model of traditional TV, leading to high licensing costs and relatively low revenues per subscriber.
This shift in economics created challenges for media companies, and some, like Netflix and Disney, faced setbacks in subscriber growth. To counteract these challenges, media organizations have turned to strategies reminiscent of the traditional TV bundle, such as advertising, password-sharing crackdowns, and price increases.
The industry also witnessed a content arms race, with studios pouring massive sums into creating new shows and films to attract subscribers. However, this spending spree raised concerns about the sustainability of such investments.
One significant disconnect lies in the lack of transparency regarding streaming viewership data, which has fueled contentious negotiations between studios and industry professionals, particularly writers and actors. These professionals seek compensation tied to a show’s popularity on streaming platforms, similar to the residuals paid for traditional TV broadcasts.
To make streaming profitable, media companies are resorting to various models, including advertising, licensing content to other platforms, and windowing content across different platforms. They are also embracing ad-supported offerings to diversify revenue streams. The pay-TV bundle, despite cord-cutting, remains a reliable source of revenue, with some streaming services being bundled with pay TV subscriptions.
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