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Strike Ending & Amazon Antitrust - Streaming Services: Power Rankings, FALL 2023
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<blockquote data-quote="Snarf Zagyg" data-source="post: 9186313" data-attributes="member: 7023840"><p>As you may have noted from the fact that I actually have done these posts for a while, I keep up with the Business (as in, the capital "B" Business). You're welcome to do the deep dive yourself regarding profitability. I don't think it's necessary to go into a long discussion about why Prime is not profitable.</p><p></p><p>As for Hulu, I explained it briefly, but it's pretty simple. First, Hulu has always had a successful ad-supported lower-price tier. Second, Hulu isn't a stand-alone entity, it's always been co-owned by multiple other studios. This has a massive impact in terms of the material it has available and its cost structure. Third, Hulu <em>qua </em>Hulu is only available in the United States, which means that it has always had the ability to pay less for certain content (because it could be licensed to other streamers outside the U.S.) while keeping a high margin in terms of having a wealthy customer base. Fourth, while numbers can't be certain, it is believed that Hulu first started generating profits in 2019-2020; amazingly, that was after Disney+ offered it as part of a bundle, which meant that Hulu was suddenly gaining a lot of new subscribers without increasing its costs. Effectively, Disney+ was subsidizing Hulu's subscriber growth. </p><p></p><p>You can't really count it, though, because as much as I love Hulu (and I do love Hulu) it's <em>sui generis</em>- the specific conditions it operates in could not last. The process has been operating for some time (this is why it lost NBC content last year) and it will have the benefits, and drawbacks, of operating within the fully integrated Disney+ environment. </p><p></p><p></p><p></p><p>I disagree. Streaming is the future, for better and for worse. The problem, of course, is that the future of streaming is increasingly looking like the past. </p><p></p><p>That means more ads and higher prices.</p><p></p><p>Those of us who got on the gravy train early remember a time when Netflix was able to license ALL THE CONTENT (well, not all, but it seemed like all of it) because it was the only game in town. But that's not the case anymore.</p><p></p><p>Then, we remember when Wall Street was signaling everyone and their mother to get into streaming and to simply burn as much cash as possible to throw all of the content at us, as quickly as possible. But that's not the case anymore, either.</p><p></p><p>If I had to pick a model (and I am loathe to do so), I would assume that we will a shakeout, with the following-</p><p>1. Various FAST services. Yay, the future of streaming is ... the past of television.</p><p>2. A few "real" streamers. Pricy ad-free options, and cheap ad-supported versions. On-demand streaming, as much as you want, with a large, but finite, catalog that is changing on a monthly basis. Expect that they will have some live sports, with additional options to pay for additional sports. How many real streamers? Less than we have now. Charging more. </p><p>3. Other programs (the "long tail") will likely be available on POD. You'll have to pay to watch them. Because streamers want to keep a semblance of a back catalog (to keep the eyes) but don't want to keep too much (to avoid costs). </p><p>4. Finally, there will be a few specialty streamers and/or sports services available to cater to niche interests, either as stand-alone or as optional up-charges to the real streamers (or both). </p><p></p><p>Am I going to be correct? Don't know. This is just an opinion. Lots of things could change and alter this, such as government action to end cross-subsidies by Amazon (especially) or Apple (perhaps). Or new technology. Or a change in the residuals model for older shows that allows streamers to continue to keep them in the rotation regardless of viewership. Who knows? </p><p></p><p>Then again, fifteen years from now, maybe we are all watching custom shows created by NetflixAI. Heck, maybe everyone will just be watching TikTok. Life is weird like that. </p><p></p><p></p><p></p><p>The actual metrics are a closely-guarded secret. It's also questionable (given the changing conditions) as to how valuable shows are that drive subscribers are, as opposed to shows that keep subscribers ("sticky" shows). After all, a show that brings in a subscriber for only a month doesn't do much compared to a show that keeps a subscriber that you've had for the past year (the stickiness issue is also why services are offering discounts to year-long plans and/or auto-renews). </p><p></p><p>That said, <em>new</em> content tends to be the driver of subscriptions (at least, from what people can glean). For various reasons, people today assume that old content, even old content that they want to see, will be available; if not now, then later, if not on this platform, then another platform at another time. Old content (such as L&O, or Suits, or Friends) might be really sticky, and bingeable, but it's not usually a great driver of new subs. New movies that people want to see, new series (or new seasons of hyped series) - those tend to drive new subs. </p><p></p><p></p><p></p><p>The reason AppleTV+ is taking a loss is because it's a hobby, and Apple makes money off of hardware.* They offered generous free trials (six months!) with the purchase of new hardware, they had the lowest prices around (started at $4.99, now at $9.99), they don't have advertisements, and they are shelling out a metric ton for content, from big-budget movies (Scorcese) to shows (yes, <em>See</em> cost $15 million (!!!) per episode, and <em>Foundation</em> was not cheap either), to sports rights ($2.5 billion for MLS, plus some type of deal with Messi, ~$600 million for MLB, although really only $380 million or so if the ad guarantees are met). </p><p></p><p>Personally, I appreciate their plan, and think it's a great way to build a service. Spend money on quality content. But most streamers can't afford to do that, because most streamers aren't being subsidized by, well, Apple. </p><p></p><p></p><p>*No longer strictly true. Their services division, which includes the money made off of the iOS store and music and app purchases, is a serious money-maker for them now, accounting for 25% of revenues. But 75% is hardware, and they consider themselves a hardware company.</p></blockquote><p></p>
[QUOTE="Snarf Zagyg, post: 9186313, member: 7023840"] As you may have noted from the fact that I actually have done these posts for a while, I keep up with the Business (as in, the capital "B" Business). You're welcome to do the deep dive yourself regarding profitability. I don't think it's necessary to go into a long discussion about why Prime is not profitable. As for Hulu, I explained it briefly, but it's pretty simple. First, Hulu has always had a successful ad-supported lower-price tier. Second, Hulu isn't a stand-alone entity, it's always been co-owned by multiple other studios. This has a massive impact in terms of the material it has available and its cost structure. Third, Hulu [I]qua [/I]Hulu is only available in the United States, which means that it has always had the ability to pay less for certain content (because it could be licensed to other streamers outside the U.S.) while keeping a high margin in terms of having a wealthy customer base. Fourth, while numbers can't be certain, it is believed that Hulu first started generating profits in 2019-2020; amazingly, that was after Disney+ offered it as part of a bundle, which meant that Hulu was suddenly gaining a lot of new subscribers without increasing its costs. Effectively, Disney+ was subsidizing Hulu's subscriber growth. You can't really count it, though, because as much as I love Hulu (and I do love Hulu) it's [I]sui generis[/I]- the specific conditions it operates in could not last. The process has been operating for some time (this is why it lost NBC content last year) and it will have the benefits, and drawbacks, of operating within the fully integrated Disney+ environment. I disagree. Streaming is the future, for better and for worse. The problem, of course, is that the future of streaming is increasingly looking like the past. That means more ads and higher prices. Those of us who got on the gravy train early remember a time when Netflix was able to license ALL THE CONTENT (well, not all, but it seemed like all of it) because it was the only game in town. But that's not the case anymore. Then, we remember when Wall Street was signaling everyone and their mother to get into streaming and to simply burn as much cash as possible to throw all of the content at us, as quickly as possible. But that's not the case anymore, either. If I had to pick a model (and I am loathe to do so), I would assume that we will a shakeout, with the following- 1. Various FAST services. Yay, the future of streaming is ... the past of television. 2. A few "real" streamers. Pricy ad-free options, and cheap ad-supported versions. On-demand streaming, as much as you want, with a large, but finite, catalog that is changing on a monthly basis. Expect that they will have some live sports, with additional options to pay for additional sports. How many real streamers? Less than we have now. Charging more. 3. Other programs (the "long tail") will likely be available on POD. You'll have to pay to watch them. Because streamers want to keep a semblance of a back catalog (to keep the eyes) but don't want to keep too much (to avoid costs). 4. Finally, there will be a few specialty streamers and/or sports services available to cater to niche interests, either as stand-alone or as optional up-charges to the real streamers (or both). Am I going to be correct? Don't know. This is just an opinion. Lots of things could change and alter this, such as government action to end cross-subsidies by Amazon (especially) or Apple (perhaps). Or new technology. Or a change in the residuals model for older shows that allows streamers to continue to keep them in the rotation regardless of viewership. Who knows? Then again, fifteen years from now, maybe we are all watching custom shows created by NetflixAI. Heck, maybe everyone will just be watching TikTok. Life is weird like that. The actual metrics are a closely-guarded secret. It's also questionable (given the changing conditions) as to how valuable shows are that drive subscribers are, as opposed to shows that keep subscribers ("sticky" shows). After all, a show that brings in a subscriber for only a month doesn't do much compared to a show that keeps a subscriber that you've had for the past year (the stickiness issue is also why services are offering discounts to year-long plans and/or auto-renews). That said, [I]new[/I] content tends to be the driver of subscriptions (at least, from what people can glean). For various reasons, people today assume that old content, even old content that they want to see, will be available; if not now, then later, if not on this platform, then another platform at another time. Old content (such as L&O, or Suits, or Friends) might be really sticky, and bingeable, but it's not usually a great driver of new subs. New movies that people want to see, new series (or new seasons of hyped series) - those tend to drive new subs. The reason AppleTV+ is taking a loss is because it's a hobby, and Apple makes money off of hardware.* They offered generous free trials (six months!) with the purchase of new hardware, they had the lowest prices around (started at $4.99, now at $9.99), they don't have advertisements, and they are shelling out a metric ton for content, from big-budget movies (Scorcese) to shows (yes, [I]See[/I] cost $15 million (!!!) per episode, and [I]Foundation[/I] was not cheap either), to sports rights ($2.5 billion for MLS, plus some type of deal with Messi, ~$600 million for MLB, although really only $380 million or so if the ad guarantees are met). Personally, I appreciate their plan, and think it's a great way to build a service. Spend money on quality content. But most streamers can't afford to do that, because most streamers aren't being subsidized by, well, Apple. *No longer strictly true. Their services division, which includes the money made off of the iOS store and music and app purchases, is a serious money-maker for them now, accounting for 25% of revenues. But 75% is hardware, and they consider themselves a hardware company. [/QUOTE]
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