Most financial analysts who cover the media and entertainment sectors predict that major studios and streamers will struggle in 2023 to control the costs of operating their streaming services, while maintaining or growing market share. Meanwhile, traditional networks will continue to experience declines in audience and revenues from traditional TV and Cable channels.
Only a few years ago, most media giants were buzzing at the opportunity to build direct customer relationships by offering exciting… and expensive streaming services. The middlemen in entertainment distribution would be cut out, including motion picture exhibitors for movies and TV and Cable networks for programs and series.
However, it now seems that the cost of “going direct” was grossly underestimated. JB Perrette, CEO and President of Global Streaming at Warner Bros. Discovery, explains that studios forgot about the potential to monetize their content across multiple release windows and platforms. “The streaming business got into the content-warehousing business.
For the economics of content, warehousing is not a good strategy.” WBD is now pursuing a strategy of releasing their new movies to theatres first, followed by a broader release on streaming platforms. Movies such as HOUSE PARTY and MAGIC MIKE LAST DANCE which were once targeted for streaming-only or day-and-date releases are now opening in theatres first. Exhibitors are as thrilled to have the first crack at offering these titles to eager moviegoers.
Another adjustment by studios is to offer consumers the option to watch premium content on Free Ad-Support Television (FAST) channels, which will generate new revenue from advertising without consumers having to pony up for another streaming subscription. At the same time, streamliners are increasing the price of their premium subscriptions, which will still allow consumers to watch content with advertising interruptions.
Warner Bros. Discovery plans to increase the monthly rate for HBO Max subscribers from $14.99 to $15.99, Apple TV+’s monthly rate increased last fall by 40%, the ad-free version of Disney+ has jumped from $8 to $11 and Netflix now offers three tiers of pricing, including a low-cost, ad-supported option.