Why the era of cheap streaming is over

Summary

The video script discusses the rising costs of streaming services like Disney Plus, Netflix, Amazon Prime, Apple TV+, and Hulu, and explores the reasons behind these price hikes. It highlights Netflix's strategy of subscriber growth and content investment that led to significant debt, and how the company's slowing growth and loss of subscribers in 2022 prompted a shift towards converting password sharers into paying customers. The script also mentions Hulu's successful ad-supported tier and the industry trend towards offering more affordable, ad-supported plans. Despite these strategies, many streaming companies remain unprofitable due to the high costs of launching and competing with established services. The video suggests that consumers can respond by becoming strategic 'serial churners,' unsubscribing and resubscribing based on content interests, or by subscribing to a few services and selectively adding others. It encourages viewers to reevaluate their streaming habits to find a cost-effective approach that suits their preferences.

Takeaways

• 📈 **Price Increases**: Streaming services like Disney Plus, Netflix, Amazon Prime, Apple TV+, and Hulu have increased their subscription prices.
• 📺 **Content Distribution**: High-quality content is spread across multiple streaming platforms, leading to the need for multiple subscriptions to access everything.
• 💸 **Financial Strain**: The cost of subscribing to multiple streaming services is becoming a burden for consumers.
• 🎯 **Netflix's Strategy**: Netflix historically relied on subscriber growth and price increases to boost revenue, taking on significant debt to create exclusive content.
• 📉 **Growth Plateaus**: Netflix faced a slowdown in subscriber growth, eventually leading to a loss of subscribers in 2022, indicating market saturation.
• 🔄 **Password Sharing**: Netflix initially tolerated password sharing as a means to expand its user base, but later sought to convert sharers into paying customers.
• 📊 **Hulu's Model**: Hulu introduced an ad-supported tier that was successful enough to warrant a price reduction, demonstrating the potential of advertising in streaming services.
• 📈 **Market Adaptation**: Other streaming services are following Netflix and Hulu's lead by introducing ad-supported tiers to attract more subscribers.
• 💰 **Profitability Challenges**: Despite price hikes and added advertising, many streaming services are still not profitable due to the high costs of launching and competing with established services.
• 🤔 **Consumer Behavior**: Some consumers, known as 'serial churners,' strategically subscribe and unsubscribe to services based on content interest, saving money and tailoring their viewing experience.
• ❓ **Consumer Choice**: The changing landscape of streaming services prompts consumers to reconsider their approach and select the most cost-effective and personalized viewing options.

Q & A

What was the main reason for the price increase of streaming services like Disney Plus and Netflix?

The main reason for the price increase was to combat issues like debt, revenue losses, and subscriber losses. Companies needed to become or remain profitable, and they did this by raising prices and adding ads to their services.

How did Netflix initially grow its subscriber base and why did that strategy change?

Netflix initially grew its subscriber base by attracting new subscribers and raising prices. However, as they reached a growth ceiling, they realized they needed to convert some of the password sharers into paying customers to continue growing.

What strategy did Netflix adopt when they realized their growth had slowed down?

Netflix started to focus on converting password sharers into paying subscribers, which created a temporary surge in subscribers. They also introduced an ad-supported tier to attract more cost-conscious consumers.

Why did Hulu's ad-supported tier become a significant part of their business model?

Hulu's ad-supported tier was successful because it was the most lucrative part of their business. It was so successful that they lowered the price to attract more subscribers, and it became a model that other streaming services started to follow.

What is the term used in the industry for consumers who frequently unsubscribe and resubscribe to streaming services based on content interest?

These consumers are referred to as 'serial churners.'

What is the percentage of people who were serial churners in 2023 according to Antenna analytics group?

According to the analytics group Antenna, one in five people were serial churners in 2023.

Why might some consumers choose to remain subscribed to multiple streaming services indefinitely?

Consumers who have a strong interest in filmmaking, movies, and TV might choose to remain subscribed to multiple services to have continuous access to a wide variety of content.

What is the middle ground approach suggested for managing subscriptions to multiple streaming services?

The middle ground approach is to subscribe to one or two services indefinitely and then strategically 'churn' on other services, subscribing and unsubscribing based on the content that is of interest at any given time.

What was the impact of the pandemic on Netflix's subscriber growth in 2020?

The pandemic in 2020 led to Netflix having its best year ever in terms of subscriber growth.

What is the common strategy among streaming services to deal with financial challenges?

The common strategy among streaming services to deal with financial challenges is to raise prices and/or introduce ads to their platforms.

How has the increase in streaming service prices affected the consumer's perspective on streaming?

The increase in prices has led consumers to reconsider their relationship with streaming services, prompting them to strategize and be more selective about which services they subscribe to and when.

What is the significance of the shift to ad-supported tiers in the streaming industry?

The shift to ad-supported tiers signifies a return to a traditional cable TV model, where advertising revenue supplements subscription fees, helping to lower costs for consumers and potentially increasing profitability for streaming platforms.

Outlines

00:00

📈 Streaming Service Price Hikes

The paragraph discusses the recent trend of price increases across various streaming services such as Disney Plus, Netflix, Amazon Prime, Apple TV+, and Hulu. It raises concerns about the financial burden on consumers who want to access a wide range of content spread across these platforms. The speaker ponders how we arrived at a point where streaming services are so costly and questions if there's a better way for consumers to manage these expenses. The focus then shifts to understanding the situation from the perspective of the streaming platforms, starting with Netflix, the largest and oldest of these services.

05:00

🔄 Netflix's Growth and Strategy Shift

This paragraph delves into Netflix's business model and strategy, which historically relied on subscriber growth and price increases to boost revenue. The company had accumulated significant debt to create original content and reduce reliance on licensed content. Despite this, Netflix experienced steady growth until 2020, when the pandemic led to their best year ever. However, growth slowed in the following years, and in 2022, Netflix faced its first subscriber loss. The company then recognized the potential revenue in converting password sharers into paying subscribers, which led to a temporary increase in subscribers. Other companies have since followed suit. The paragraph also highlights Hulu's successful ad-supported tier and the industry's shift towards more affordable, ad-supported plans to attract new customers and increase profitability.

16:14

🎬 The Impact on Film and TV Enthusiasts

The speaker, identifying as a film and TV enthusiast, acknowledges the personal commitment to subscribing to multiple streaming services despite the rising costs. They suggest that individuals with a deep interest in this area might be willing to accept the increased monthly expenses in order to maintain access to a broad selection of content. The paragraph also introduces the concept of 'serial churners,' a group of consumers who strategically unsubscribe and resubscribe to services based on their content interests at any given time, potentially saving money and tailoring their media consumption more effectively.

21:33

🔄 Strategic Approaches to Streaming Subscriptions

The paragraph introduces the idea of a middle-ground approach to managing streaming service subscriptions. It suggests subscribing to one or two services indefinitely while strategically 'churning' (unsubscribing and resubscribing) to others based on content availability. This approach requires effort and planning but can be cost-effective. The speaker shares their personal experience, mentioning the services they have opened and closed in the recent past, and acknowledges that different people may have varying appetites for such an approach.

27:08

📉 Netflix's Subscriber Loss in 2022

This paragraph focuses on a significant event in Netflix's history: the loss of subscribers for the first time in 2022. Initially, they lost 200,000 subscribers, which then escalated to a million. The repetition emphasizes the gravity of this development for the company, which had previously experienced only growth. The paragraph underscores the challenges streaming services face as they approach market saturation and the need to adapt their strategies to retain and grow their subscriber base.

Keywords

💡Streaming Services

Streaming services are platforms that deliver media content like movies, TV shows, and music directly to consumers over the internet. They have become a significant part of the entertainment industry, with various services like Disney Plus, Netflix, and Hulu offering different types of content. In the video, the rising cost of these services is a central theme, as the speaker discusses the financial implications for consumers who want to access a wide range of content.

💡Price Increase

A price increase refers to the act of raising the cost of a product or service. In the context of the video, it is used to describe the recent trend of streaming platforms like Disney Plus, Netflix, and Amazon Prime raising their subscription fees. This is a key issue as it directly affects the affordability of accessing content for consumers and is a driving factor behind the discussion on how to manage streaming costs.

💡Netflix

Netflix is a leading subscription-based streaming service known for its extensive library of movies, TV shows, documentaries, and original content. The video discusses Netflix's business strategy, subscriber growth, and the challenges it faces with debt and password sharing. Netflix's approach to handling these issues provides insight into the broader streaming industry's strategies for revenue generation and subscriber retention.

💡Password Sharing

Password sharing is the practice where a subscriber of a streaming service shares their login credentials with others who are not official subscribers. In the video, it is mentioned as a phenomenon that initially helped Netflix grow its user base but later became a concern as it limited the potential for adding new paying subscribers. Netflix's response to this issue is part of their strategy to maximize revenue.

💡Ad-Supported Tier

An ad-supported tier is a subscription level offered by streaming services that includes advertisements in the content, typically at a lower cost than ad-free options. The video highlights Hulu's success with this model and how other services, including Netflix, have introduced similar tiers to attract cost-conscious consumers. This approach is significant as it represents an adaptation to market conditions and consumer preferences.

💡Profitability

Profitability refers to the ability of a company to generate more income than its expenses, resulting in a profit. The video discusses how many streaming companies are not yet profitable due to the high costs of launching new services and competing with established platforms like Netflix. This is a critical aspect of the video's narrative as it explains why these companies are raising prices and introducing ads.

💡Serial Churners

Serial churners are consumers who strategically unsubscribe and resubscribe to streaming services based on the content they want to watch at a particular time. The video introduces this term to describe a growing group of people who are finding cost-effective ways to manage their streaming expenses by only paying for services when they need them. This behavior is an example of consumer adaptation to the changing landscape of streaming services.

💡Cable to Streaming

The transition from cable to streaming refers to the shift in consumer behavior from traditional cable television subscriptions to on-demand internet-based streaming services. The video mentions this to highlight the initial appeal of streaming, which was the ability to choose what to pay for and potentially save money compared to bundled cable packages. However, as streaming services increase in cost, the video questions whether this advantage still holds.

💡Content Bundling

Content bundling is the practice of offering multiple media products or services together, often at a discounted rate, compared to purchasing each item individually. The video contrasts this traditional cable TV model with the more individualized approach of streaming services. However, it also notes that as streaming services increase in price, they are starting to resemble the bundled cable packages they were initially seen as an alternative to.

💡Media Diet

A media diet refers to the specific types and amounts of media content that an individual consumes. In the context of the video, the term is used to discuss how consumers can strategically manage their subscriptions to streaming services to fit their personal preferences and financial constraints. The concept is central to the video's exploration of how individuals can navigate the increasingly complex and costly world of streaming entertainment.

💡Strategic Approach

A strategic approach involves making deliberate and well-thought-out decisions to achieve a goal. In the video, this term is used to describe how some consumers are managing their streaming service subscriptions in a calculated way to minimize costs and maximize the value they get from each service. This approach is presented as a potential solution for consumers feeling overwhelmed by the rising costs of streaming services.

Highlights

The price of Disney Plus annual plan increased to $140.

Netflix introduced an ad-supported tier to its most affordable subscription plan.

Amazon Prime's monthly fee increased by $3.

Apple TV+ subscription price rose from $6.99 to $9.99.

Hulu's monthly subscription fee is set to increase to $18.

Netflix's strategy relied on subscriber growth and price increases to outpace debt.

Netflix had taken on almost $15 billion in debt by 2020 to build its content platform.

Netflix experienced its best growth year during the 2020 pandemic.

Netflix faced slower growth and subscriber losses in 2022.

Password sharing was initially seen as a way to expose more people to Netflix's service.

Hulu's ad-supported tier was its most lucrative business model.

Advertising has been a key to successful video businesses, including cable.

Many streaming services have introduced ad-supported tiers to attract more subscribers.

Most streaming companies are not yet profitable due to high launch and content costs.

Individuals have different approaches to subscribing to streaming services, from subscribing to all to being more strategic.

Serial 'churners' strategically unsubscribe and resubscribe to services based on content interests.

One in five people were serial churners in 2023 according to analytics group Antenna.

A middle-ground approach is subscribing to one or two services and then strategically using others.

The ability to choose what to pay for is a key reason people switched from cable to streaming.

Streaming services are entering a new, increasingly expensive era.

Transcripts

Late last year, I got an email.

It said that the price of my Disney Plus

annual plan was increasing to $140.

But that wasn't the only one.

Netflix was going up

and their most affordable tier would now have ads.

Amazon Prime would be $3 more a month

Apple TV+ went from $6.99 to $9.99.

Hulu is going up to $18 a month.

There are so many great things to watch

and they're all spread across so many different services.

I want to watch them all, but man,

does it hurt to fork up so much money every month to do it.

It kind of makes you wonder,

how did we all end up in this position where

we're paying so much for streaming every month?

And maybe more importantly, can we as consumers do any better?

To answer these questions,

we first need to look at the story

from the streamers’ perspective.

And we'll start with Netflix.

the biggest oldest streamer around.

For most of its history, Netflix made money in one way,

its subscribers.

So if Netflix wanted to make more money,

they either had to add subscribers or raise prices.

This was always Netflix's strategy.

As this 2021 New York Times article explains,

the CEO and founder of Netflix was betting that the company

could attract subscribers

and raise its prices faster than the debt clock was ticking.

And Netflix had taken on a lot of debt...

almost $15 billion by 2020,

with the purpose of building

an entire platform's worth of content,

ensuring that they weren't reliant on movies and TV that they didn’t own,

like The Office or Friends.

This strategy worked, and for a long time,

Netflix grew really reliably, even as its prices went up.

They'd had very steady growth, 2015, 16,

17, 18, 19, and then the pandemic happens in 2020,

and they have their best year ever.

That's Lucas Shaw, by the way.

Managing Editor for Media and Entertainment at Bloomberg News,

and I'm also the author of the newsletter Screentime.

Netflix got to a point where

they realized that

their growth was much slower than it had been.

Growth continues to be slower in 2021

and looking into 2022, they get nervous.

And then in 2022

Netflix actually lost subscribers.

Just 200,000 at first, and then a million.

There are only so many people in the population, right?

Even if you got everyone there is a ceiling to that.

But they also knew that they had more customers

than it appeared.

This phenomenon of password sharing.

Netflix had said publicly that they were not worried about it.

And I think early on, it's true, they were not worried about it

because password sharing was a way

of exposing the service to more people.

And if people liked it, they would convert.

But at a certain point when they hit a bit of a ceiling,

they're looking at the numbers and they said,

The only way that we're going to be able to grow

is if we convert some of those sharers into payers.

This move created a temporary surge in subscribers.

It made enough of a dent that other companies

are following in these footsteps.

But Netflix isn't the only trendsetter.

While all this was going on,

another company was carving out a slightly different path.

Hulu has always had two tiers to its service

ad free and ad supported.

According to this 2019 article, Hulu's ad supported

option was the most lucrative tier of their business.

It was so successful they actually lowered the price

from $7.99 to $5.99

Advertising has been the key

to a successful video business forever.

You know, you think about the cable business,

you don't think about paying for discrete channels,

but you are paying for a bundle of channels.

And, oh by the way, those channels still have advertising.

So it's not really a foreign concept.

That's something that Hulu had done quite effectively.

As more streamers crowd the market with ever increasing prices.

pretty much every service,

including Netflix, has introduced a more affordable

ad supported tier to their offerings,

which people seem to appreciate.

Ad supported plans have been driving

an increasing percentage of new signups

and supplementing each company's bottom line.

But here's the thing.

Most of these companies still aren't profitable.

Part of it is just they're so new.

I think we lose sight of that.

Like these companies spent billions

and billions of dollars to launch

new services and take on Netflix.

And they tried to condense, you know,

15 years of Netflix’s streaming service into 3-5.

And that was very expensive.

So that's it, more or less.

Companies fighting debt, revenue losses,

subscriber losses, or a mix of those things

have raised prices and added ads

in hopes to become or remain profitable.

But what does that mean for us as individuals?

Well, if you're like me

and have crafted your personality

around filmmaking, movies and TV, then you might be subscribed

to a bunch of streaming services indefinitely.

This isn't cheap,

but it's the kind of thing

that you might be willing to invest in.

So maybe the answer for me is to do nothing

and just accept the increased monthly cost

because I find value in having access

to all of the streaming services.

But in researching this video,

I found that there is a growing group of people

that have a much more strategic approach.

They're called serial “churners,”

which is just the industry way of saying

that this type of consumer isn't static.

They're churning, or unsubscribing and resubscribing, to services

based on what they want to watch in a particualr month.

According to the analytics group Antenna,

one in five people were serial churners in 2023.

It seems like the answer for these people

is that it's worth the effort to hop around.

They can save money and more selectively access

content on their own timeline.

A more middle ground approach might be to subscribe

to one or two services indefinitely

and then hop around on the other ones.

I've opened Max, Netflix, Hulu and Amazon

all within the last month,

maybe within the last couple of weeks.

And then Paramount Plus and Peacock, I guess

yes, I'm a churner for those.

I sign on and off depending on what happens,

and that's fine for me. And everyone else,

their appetite is going to be different.

Maybe other people only want to be permanently signed on for two.

This approach requires

some effort and strategy around your media diet,

but it could be quite cost effective in the long run.

And that's one of the reasons

that we switched from cable to streaming to begin with.

The ability to choose what you pay for.

Streaming has changed a lot.

We're in a new, weird, increasingly expensive era of it.

Maybe that means it's time we start looking at our relationship to streaming differently

and start asking the question

How do you make your streaming diet work for you?

But what does that mean for us as individuals?

Well,

if you're like me and have crafted

your personality around filmmaking, movies and TV,

then you're probably subscribed

to a bunch of streaming services indefinitely.

But in researching this video,

I found that there is a growing group of people

with a much more strategic approach.

They're called serial turners.

A more middle ground approach

might be to subscribe to one

or two streaming services indefinitely

and then hop around on other ones.

Who's going up to $18 a month.

Hulu is going up to $18 a month.

Hulu.

Hulu is going up to $18 a month.

Hulu is going up to $18.

Hulu.

Hulu is going up to $18.

And then for the first time ever,

Netflix actually lost subscriber year's

first 200,000 and then a million,

first 200,000 and then

a million, first 200,000

and then a million.

And then in 2022,

for the very first time, Netflix actually

lost subscribers,

just 200,000 at first and then a million.

And then

and then in the second.

And then in 2022, for the very first time,

just 200,000 at first and then a million

and then in 2022,

for the very first time, Netflix actually lost subscribers,

and then a million.

And then in this.

Netflix actually lost subscribers

just 200,000 at first and then a million,

just 300,000 at first,

and then a million

and then

just 200,000 at first.