A trend that we expect to see continuing into 2024 is streaming consolidation. We’ve seen this already happen quite a bit in 2023 (and, to an extent, in 2022). In 2022, WarnerMedia and Discovery announced their merger, which was finalized in 2023, and the combined company is now Warner Bros Discovery, with the relaunched “Max” app to go along with it.
In 2023, we also saw Disney purchase the remaining portion of Hulu from Comcast. Disney paid $8.6 billion for Comcast’s 33% stake in Hulu, however they will likely be paying more in the future, after an appraisal is done. While this isn’t really a consolidation, it does mean that Disney can push Disney+ into Hulu and vice-versa.
At the end of 2023, we’ve started to hear rumors of Warner Bros Discovery and Paramount in talks to merge. That would make the company about as large as NBCUniversal and Disney, as well as Netflix, from a streaming perspective.
So why are we seeing all of this consolidation? It’s simple. Most of these streaming services are not making money. This is because there are so many streaming services that most people aren’t subscribing to more than two or three, with a few subscribing to around five streaming services. This is forcing streaming services to look again at their strategy.
Additionally, studios are finding that it is more lucrative to license their content to other streaming services versus putting it on their own streaming service. A big reason for this is that most streaming services offer an ad-supported tier now. And in the contracts for those ad-supported tiers, the studio gets a cut of the ads played alongside their content. That is making it more lucrative for, say, Warner Bros to license the Harry Potter franchise to Peacock.
Streaming consolidation isn’t just about mergers
While we are seeing more and more companies looking at mergers to compete with the bigger streamers, that’s not all that’s going to happen within the consolidation phase. Bundles are going to be a big part of consolidation, which we have already started to see happen.
There have been rumors lately that Apple and Paramount were in talks to offer a bundle that would see users getting both Paramount Plus and Apple TV Plus for a low price. No price was mentioned other than saying it would be cheaper than subscribing to both services separately.
Verizon has also been a big player in this space its +play service, which allows you to subscribe to different services, all through your Verizon account. But you can also get credit for +play every month, which saves you a few bucks. Verizon has also recently launched a Netflix and Max bundle for $10 per month, which is an incredible discount.
These streamers are ultimately looking to target Netflix, which is currently the big dog in the streaming world. A big part of that is Netflix’s early start in streaming. Netflix began its streaming counterpart in 2007, so they’ve been doing this for quite some time. Started out with licensing content from a number of studios and is now doing a hybrid of licensing and creating its own original content. For quite some time, Netflix was spending so much on original content that it was not making money. However, that has changed now. Netflix is pretty quick to pull the plug on content that isn’t doing as well as they had hoped, which has been a huge negative for the service as of late.
What’s the future of streaming?
Here are a couple of things to remember about streaming as we move into 2024. The first thing is interest rates. It’s currently more expensive to borrow money than it was a couple of years ago. That means a lot of streaming companies and studios are spending less on content. And that, in turn, is going to cause more churn of customers, which will result in less revenue coming in.
Additionally, we’re in the middle of a recession right now, where consumers are going to be tightening their belts a bit. Obviously, one of the first things that consumers will cut is indeed streaming services. They are easy to cancel, and it’s not necessarily a need for a lot of people.
While this won’t necessarily happen in 2024, I could see a lot of these smaller streaming services going away. Now whether that means merging or simply going bankrupt and pulling the plug is another story. But I do believe we’ll be left with no more than five main streaming services. That would be Netflix, Hulu, Max (if the Warner Bros Discovery and Paramount merger happens), Amazon Prime Video, and Apple TV Plus. I believe that Amazon Prime Video and Apple TV Plus will stick around because these are not the main businesses for Amazon and Apple. In fact, they are loss leaders. So they can stick around and continue losing money for these companies, as long as they bring in more customers for their other businesses.
But as for the main three – Netflix, Hulu, and Max – I think that would be a really great group of streaming services. Unfortunately, I can see prices continuing to rise. And for everyone saying, “It’s just as expensive as cable,” first off, it is not. Secondly, you can cancel any of these services at any time; that’s something you can’t do with cable – it’s either all or nothing.
2024 and beyond is going to be rather interesting for streaming. It’s going to be very interesting to see which streaming services fold, which ones merge with others, and which are still around this time next year.
2023-12-26 15:05:15