Why Cable Lost But Streaming May End Up Killing the Media Industry

It's is expensive to produce, remains highly unprofitable for virtually every company involved in it - and fragmentation makes it worse. This could turn around, but probably only with re-consolidation for the top few providers. JL


Shira Ovide reports in Bloomberg:

Streaming won. Winning, though, has never looked this bad. No major subscription provider generates reliable profits from streaming video. Some companies such as Amazon and Apple care less about profits than selling shoes or smartphones. For the first time, companies control everything from words on a script page to pixels on a TV screen — and all the revenue they generate — vs. having to pay a distributor. Maximum control lets companies glean maximum profits from their creations. It also increases the risk if things go badly.

People have been talking about the streaming era for so long that it’s hard to imagine the tipping point just happened. In 2019 the rate of Americans quitting cable went from steady slide to avalanche. TV ratings continued to tumble. The three biggest U.S. entertainment titans made the jump into original streaming video, as did Apple Inc.

It’s time to really, truly declare that streaming won. Winning, though, has never looked this bad.

No major subscription provider generates reliable profits from streaming video. The king, Netflix Inc., has borrowed $13 billion as the cash it spends on programming exceeds the fees it gets from subscribers. (Netflix is profitable on a noncash basis.) Walt Disney Co. says that Hulu, which it took over last year, won’t turn a profit until 2023 or later. HBO Max, which is launching this year, is forecast to be unprofitable through 2024. By most outsiders’ estimates, Disney+, Prime Video from Amazon.com, CBS All Access, Apple TV+, and YouTube TV aren’t paying for themselves.

© Bloomberg U.S. TV subscribers, year-over-year change*

For now this streaming red ink doesn’t matter. Some companies such as Amazon and Apple care less about profits than selling shoes or smartphones. Plus, there’s no point in trying to maximize profits if a company is going to die in the streaming war.

The economics could eventually work. For the first time, companies control everything from words on a script page to pixels on a TV screen — and all the revenue they generate — vs. having to pay a distributor. Maximum control lets companies glean maximum profits from their creations. It also increases the risk if things go badly. Enjoy that Friends binge while you still can.