COMMENTARY

Is Streaming on the Ropes?

• by Adam Buckman , Featured Columnist, Yesterday

Streaming still seems like an ingrained habit for millions, but is the bloom off the rose for this once-red-hot business?

The answer to that question is unclear. However, the streaming biz today is facing headwinds no one foresaw in its heyday just a few years ago.

Among the factors buffeting the business now: (1) The runaway costs of production, (2) a slowdown in subscriber growth and (3) a work stoppage by two powerful unions whose demands threaten to drive the price of production up even further.

It wasn’t supposed to be like this. When the majors went all-in with their streaming services one after the other from November 2019 to March 2021*, optimism was in the air.

This was especially true when the pandemic lockdowns that started in March 2020 turned a homebound nation into a population of couch potatoes.

From the perspective of the big TV companies, the sky was the limit -- or so it seemed.

Inspired by the success of Netflix, which dominated the streaming business for years, majors adopted a similar strategy based on content tonnage.

They would all feature everything they could on their giant streaming services -- all the content they could curate from all over their platform universes.

And in another page from the Netflix playbook, they poured billions into original productions exclusively for their streaming services.

The strategy seemed to be, and in many cases, still is: Keep the content pipeline filled at all times with new shows representing all genres -- dramas, comedies, reality-competitions, true crime docs, you name it -- because this is what subscribers have become accustomed to.

But more recently, with subscribership leveling off and other units of the TV companies underperforming (such as linear TV), these annual multibillion-dollar expenditures are turning out be unsustainable.

At Warner Bros. Discovery, management has been taking a whack at some high-cost productions by halting them. Meanwhile, at Disney, cost cuts have taken the form of layoffs.

But the real impetus for this TV Blog on the present, and possibly future, state of streaming is the dual strikes by the Writers Guild and Screen Actors Guild.

For an industry so dependent on churning out new content by the megaton to feed the streaming beast, a production stoppage has got to be a huge concern.

An even bigger worry might be the strikers’ demands, which boil down to: larger shares of streaming profits.

Even if the studios can negotiate the demands down a bit, the writers and actors are sure to win increases that will drive up the costs of production.

Related to this are the comments made last week by Disney CEO Robert Iger, who conceded in a CNBC interview that linear TV is basically a dying business.

He then suggested that legacy TV units of Disney such as ABC, FX and ESPN could be sold or spun off.

This would imply that the Disney strategy going forward will continue to be “streaming first,” despite the business’s various issues right now.

And what if Disney lets the ad-supported legacy businesses go? Maybe Iger believes that if Disney exits the business of ad sales on legacy networks, then that will help drive ad spending toward streaming platforms.

Perhaps that is what the future might look like: As the old broadcast and basic-cable networks fade away, the TV companies will live on streaming-subscriber fees plus ad sales.

As the TV Blog has pointed out a few times, this dual revenue stream strategy from subscriptions and advertising is the same one that enriched the basic cable business for decades. Why shouldn’t it work in the age of streaming?

*The order of new streaming launches went like this: Apple TV+ and Disney+, November 2019; Warner Media’s HBO Max, May 2020; NBCUniveral’s Peacock, April 2020; AMC+, June 2020; Discovery+, January 2021; and Paramount+, March 2021.