Consumers want more content choice, not more platform choice.
Among the big digital streaming stories lost in the Christmas and New Year frivolities, the serious business of totting up gains and losses for the video streamers was underway.
And as the FT reports, $5 billon was “lost” last year by Netflix wannabes, although of course the term loss is pretty meaningless in the scheme of things.
Video streaming is a long-tail industry that needs a lot of money put up front and an expectation to break even down the road and make profits some time after that.
These five-day wonders that thought they could just buy their way into the Netflix league have had a sharp wake-up call. Some are ready to exit, and that’s good news for everyone.
Per the FT, “Disney, Warner Bros Discovery, Comcast and Paramount — US entertainment conglomerates that have been growing ever larger for decades — are facing pressure to shrink or sell legacy businesses, scale back production and slash costs following billions in losses from their digital platforms.”
My heart bleeds. These big guns waltzed into a playing field Netflix pretty much single-handedly created and nurtured, and tried to muscle in on their act with big bucks and content.
And made a complete pig’s ear of it, losing money hand over fist and alienating consumers by shunting content from platform to platform as if consumers desperately wanted to signup to a dozen different streaming platforms to see one show on each.
“Beyond their streaming losses, the traditional media groups are facing a weak advertising market, declining television revenues and higher production costs following the Hollywood strikes,” the FT reminds us, quoting Rich Greenfield, an analyst at LightShed Partners, as saying Paramount’s deal discussions with Skydance reflected “complete and utter panic” in the industry.
Explained Greenfield: “TV advertising is falling far short, cord-cutting is continuing to accelerate, sports costs are going up and the movie business is not performing. Everything is going wrong that can go wrong. The only thing [the companies] know how to do to survive is try to merge and cut costs.”
And that really says it all: “The only thing [the companies] know how to do to survive is try to merge and cut costs.“
The future of the streaming industry depends on how streaming companies adapt and innovate to meet the needs and expectations of their customers and stakeholders. Netflix has shown it’s possible. But many casualties are being lined up. It seems most of them learned nothing.
This much-needed market consolidation will fuel endless nonsensical posts over coming weeks about how streaming is dead, especially as big brands jump ship.
But the latest financial woes tells us nothing about the viability of the streaming model except that the market is overcrowded and that consumers want more content choice, not more platform choice.
This post first appeared in the TNPS LinkedIn Pulse newsletter.