I still remember the fervor and excitement that came with the launch of new streaming services like Disney+, HBO Max, Apple TV+ and Peacock, a phenomenon known in the industry as “the streaming wars.” These companies poured billions of dollars to take on stalwarts like Netflix, Hulu and Amazon Prime Video, and showed off a dizzying array of programming in slick presentations to investors. They offered the services at low rates or with aggressive free promotional periods – a whole year for free! – as they eagerly sought new eyeballs.
The streaming wars brought a flood of new services and high-quality content at low prices at just the right time, with many coming into their own in 2020 just as the pandemic forced us into our homes with little else to do. For many, these streaming services, which offered theater quality blockbuster movies like HBO Max’s Godzilla vs Kong, viral shows like Disney+’s The Mandalorian and Oscar-winning prestige pieces like Apple TV+’s CODA.
Fast forward three years and things have taken a dramatic – and worse – turn.
Subscription services are more expensive than ever. Services are starting to crack down on password sharing. The idea of Hollywood films arriving in your home on the same day it debuts in theaters is dead. More shows than ever are getting the ax, or disappearing from the service altogether. The name of the game is no longer adding customers, but a laser focus on profitability.
We’ve gone from peak streaming to the darkest timeline in fairly short fashion.
The fundamental shift in how streaming services are behaving underscores the notion that those golden days of streaming are now gone, and that unprecedented era will likely never return. All of the media giants are dealing with the consequences of those aggressive investments, but after years of having it so good, consumers are also paying the price with a new, harsher status quo.
“The ‘stream it and they will come’ era of television is over,” said Gartner analyst Eric Schmitt. “Higher subscription fees and tighter controls on account sharing will be the norm, especially for new or premium content. Syndicated programming will be available at lower cost – or for free – but carry a heavy advertising load.”
Take a look at Disney, which is talking less about the programming and more about how to squeeze more money out of its business.
“We’ve reset the whole business around economics designed to deliver sustained profitability,” Disney CEO Bob Iger said during the last quarterly investor call earlier this month. “We’re rationalizing the volume of content, what we spend and what markets we invest in.”
Nothing excites people more than “rationalizing content.”
Price Hikes a Plenty
On that same call, Iger also unveiled a series of ill-timed price hikes. It was the second series of rate increases in less than a year.
Disney isn’t alone. Peacock, Max (formerly HBO Max), Paramount+ and Apple TV+ have all raised prices in the past year, each notching up their rates by $1 or $2 a month. Netflix last raised its rate in the first half of 2022, with its most popular plan getting a $1.50 increase. Amazon, which bundles its Prime Video service with its Prime membership program, raised its annual fee by $20 to $139. YouTube TV raised its prices in March, and Hulu With Live TV will join it in October.
Basically, it’s getting more expensive no matter what you subscribe to.
The promotional windows have also gotten tighter. Apple TV+ used to offer a full free year of service to anyone who bought a new device, whether it’s a Mac or iPhone. That window is down to three months. Peacock closed off access to a lot of its content to the free ad-supported tier, pushing subscribers to upgrade.
Part of why the services are locking things down is because the streaming wars didn’t really amount to much. These massive media companies invested a small fortune into taking down on Netflix. After three years, Netflix sits on top by a wide margin.
The most popular online video site remains YouTube with 9.2% of views, with Netflix close behind with 8.5%, according to Nielsen’s July report. There’s a big dropoff before we get to the next service, Hulu, followed by Prime Video. Disney and Max are each less than a quarter of Netflix’s viewership, while Paramount+ has just a 1% slice, while Apple TV+ doesn’t even register.
If so few people are watching, the business model for continually putting out high-quality content at a low rate no longer works. That’s also why you’re seeing shows like Westworld getting unceremoniously pulled from Max or Disney+ banishing Willow just months after it debuted. Some of these shows, like Willow, don’t have physical media, so it’s like they’ve completely disappeared (or more likely, waiting to reappear on a free ad-supported service).
The result: An environment where you can’t entirely be sure your favorite show will stick around any given service.
Farewell, Password Sharing
When Netflix said it would begin cracking down on the practice of password sharing, it elicited a vocal backlash with vows to cancel the service.
But when the company actually started to go through with it, the response was far more benign.
“The cancel reaction was low and while we’re still in the early stages of monetization, we’re seeing healthy conversion of borrower households into full-paying Netflix memberships as well as the uptake of our extra member feature,” the company said in its second-quarter investor letter.
Netflix added a net 5.9 million subscribers in the period, a dramatic reversal from the 1.8 million it added in the first quarter.
The move opened the door to every other service to do the same. Iger said earlier this month that it is “actively looking” at how to crack down on password sharing, but said it wouldn’t roll out until next year.
Other services haven’t committed to stamping out password sharing, but it’s clear Netflix opened the door. You might as well start taking stock of the accounts you share with your friends and family.
Ad-Supported Services on the Rise
While Disney raised the prices on all of its services, from Hulu to ESPN+, it left the ad-supported tier unchanged. It’s clear that’s where the company wants to push consumers.
“We’re maximizing our ad potential,” Iger said.
It’s not the only one. The higher price of these services have savvy consumers dropping some of their subscriptions, as well as to live TV streaming offerings like Hulu+ Live, Sling TV or Fubo. Instead, they’re increasingly turning into free ad-supported options like Pluto, Roku Channel or Tubi.
Tubi, owned by Fox Corp., actually boasted more viewership than subscription services Peacock and Paramount+ in July, according to Nielsen.
Fox CEO Lachlan Murdoch said on a conference call to discuss its fiscal fourth-quarter results that consumption of Tubi rose by 79% and is equal to a top-five cable network.
The result is an even more fragmented universe of different services, with each ad-supported platform featuring scores of their own channels, with varying levels of quality content. It’s not just about knowing which shows are on which service, but which channels within different platforms have what you’re looking for.
“The real challenge for viewers will be seamlessly searching for, discovering and easily playing back content across a dog’s breakfast of services and devices that spans from streaming to broadcast and TV set to mobile phone,” Schmitt said.
The good news is savvy viewers are already catching on and adjusting to the new norm. But for many consumers still stuck on a myriad of increasingly expensive streaming subscriptions, there’s a lot of work to be done.