The past few months have not been easy for streamers. The specter of a recession has prompted investors to re-examine the business model and question the billions platforms are pumping into content in their race to win subscribers.
These questions became even stronger when Netflix announced in April that it had lost 200,000 subscribers – and expected to lose 2 million by July.
Amid a broader stock market meltdown, Netflix’s share price is down 67% year-to-date, making it one of Wall Street’s biggest meltdowns. But it’s not the only one. Disney’s stock price has fallen 30% year-to-date, while Warner Bros. Discovery has fallen 27% since its market debut as a merged company in April. (Numbers correct at time of writing.)
Analysts predict that rising inflation and interest rates will cause cost-conscious consumers to limit their spending on discretionary items such as streaming service subscriptions. (U.S. households currently have an average of three streaming subscriptions each, according to a recent survey by Altman Solon.)
Figuring out what consumers will do and which streamer (or streamers) they might drop is no easy task. Not too long ago, Netflix was the default choice of provider for many subscribers: its first-mover advantage, large library, and bold content plays made it an obvious choice for households. This is still true in many respects, but not as much as before – few rival streamers can match Netflix in sheer volume, but increasingly they do in terms of quality.
After a slow start, Apple TV+ is getting into its stride. Its clever acquisition of the Best Picture Oscar winner Coda has likely enticed more subscribers to try the service, while its limited offering is slowly but surely growing with quality new shows – many of them Primetime Emmy contenders – such as Breakup, the after party, slow horses, We crashed and Pachinkoto add to returns Ted Lasso, mythical quest and The morning show.
HBO Max has also impressed, with a recent slate that includes station eleven, The White Lotus, Peacemaker, Julia, Naughty, Golden age and Deputy Tokyo – and the acclaimed comeback series Succession and Euphoria. Disney+, meanwhile, is hoping the recent launch of Obi Wan Kenobi can attract more star wars fans and help it reach a goal of 250 million subscribers by 2024.
If households start cutting subscriptions, it follows that streamers may have to start cutting back on content spending — which hit $220 billion last year, according to Ampere Analysis. This, of course, would have a huge impact on the currently booming television and film production industries.
For now, however, there’s little concrete evidence that streamers are cutting back significantly. During Cannes, Netflix paid $50 million for Emily Blunt’s drama Adventurers of Painas Apple snatched up Riz Ahmed and Jessie Buckley’s sci-fi romance Nails. The Netflix deal in particular put an end to early thinking that it would be shy of exiting its portfolio after the loss of subscribers in the first quarter and the precipitous drop in market capitalization.
Streamers have, however, hinted at plans to be more careful about spending. In May, Netflix laid off 150 employees and updated its corporate culture guidelines to urge employees to “spend our members’ money wisely.” Warner Bros Discovery boss David Zaslav has spoken of the need to be “smart” and “careful” about how he spends money on content. In April, it cut CNN+, its ambitious news streaming service that had only launched a month earlier.
Still, it seems unlikely that streamers will make any deep cuts. The market is in its infancy, with many new services fighting to share. The platforms are also aware of the risks of reduction. Any sign of weakness will see producers hand over their best projects to competing services.
And, in the background, looms the specter of tech giants such as Apple and Amazon, with market capitalizations of $2.4 billion and $1.7 billion respectively. They continue to step up their streaming ambitions and are unlikely to feel the same pressure as others to limit content spending. Faced with such formidable competition, the real question is: can any streamer afford to cut costs?