As Apple TV+ makes a loss and everyone wrings their hands at Warner Bros, it seems like no-one can make narrative TV and film pay actual money.
Last week, The Information reported Apple TV+’s streaming operation is losing the company as much as $1bn each year.
As the streaming service with arguably the most consistently high-quality original output across film and TV, this isn’t ideal. Coming to the streaming game much later than its closest rivals, Apple appears to be in the same prestige era its rivals went through from 2016-2021, when Netflix was desperate to win an Oscar and Disney used its beloved back catalogue and glitzy franchise offerings to fast-track take-up of Disney+.
For one of the world’s most valuable companies, that loss could be seen as little more than a rounding error if investors were feeling generous. But the association of quality – from buzzy sci-fi dramas like Severance and Silo to prestige multi-award winners Killers Of The Flower Moon and CODA – with unprofitability remains troubling. As the only major UK streamer without an associated ad tier, even its clean, uncluttered user interface signals an intent to rise above the lowest common denominator.
Netflix, meanwhile, has become the most popular and profitable streaming service by swinging in the opposite direction. Its top ten film and TV lists are often dominated by true crime documentaries, reality television and WWE. In terms of original narrative programming, critical and commercial success stories like Adolescence and Toxic Town are the exception which proves the rule. Even $320m original blockbuster The Electric State has been overtaken by two original documentaries and a host of third-party kids’ animated hits in the two weeks since its release.
And Netflix is having a better time than most. With a business laser-focused on streaming in a way its competitors are not, it’s inevitably settled on a largely ad-supported, quantity-reliant model not a million miles from the linear TV market it sought to disrupt. But despite having swallowed the entertainment industry whole as early as 2020, it wasn’t until last year that anyone else seemed to make any money out of streaming.
In the third quarter of 2024, Disney announced its first combined profit from its streaming business (consisting of Disney+ alongside Hulu and ESPN+) of $47m. Without its sports offering, the same period recorded a $19m loss – though Hulu revenue in particular has picked up since.
Despite reporting a full-year 2024 loss of $11.3 billion overall, Warner Bros. Discovery’s direct-to-consumer outfit made its second consecutive profit last year, raking in $677m versus 2023’s $103m. Paramount+ also recorded its first profit in 2024, while Amazon head Andy Jassy has promised to make Prime Video profitable by the end of 2025. All have managed – or are planning to manage – the feat through the introduction of ad-supported tiers, price rises, or both, all while cutting down on original narrative programming.
At the same time, theatrical distribution finds itself in a rut. A complete collapse of exclusivity windows and a seemingly endless cost-of-living crisis have turned cinemagoing into a luxury an increasingly elite few are able to justify on a regular basis. A non-sequel, non-franchise movie hasn’t topped the global box office since 2013, and the bullet-proof facade of superheroes and existing IP is starting to show its cracks. The lukewarm reception to Captain America: Brave New World and Snow White (acknowledging it’s very early in the latter’s run) have left cinemas without a rock-solid hit blockbuster since Mufasa: The Lion King in December.
Since the pandemic, cinemas have been turning in greater numbers to repertory screenings to keep the lights on, but attendance seems to have stagnated at less than 80% of its peak in 2018. Cineworld’s ongoing financial difficulties have resulted in the closure of several multiplex and Picturehouse sites across the UK.
It’s a surprise, in a sense, that cinemas are continuing to perform as well as they are. The economics of the post-pandemic industry have changed such that it’s now arguably in a film studio’s interest to keep multiplex chains on a short leash. According to an IndieWire report from 2023, Universal’s revenue share, while around 50:50 with cinemas from ticket sales, is closer to 80:20 on premium-video-on-demand formats – the same formats now made available as soon as 17 days after a film’s cinema release by default. Total video-on-demand revenue for the studio was estimated to be as high as 44% as that taken from the box office.
No wonder, then, studios have been so dismissive of US multiplex chain AMC’s calls to revisit exclusivity windows. With Warner Bros reportedly spending as much as $80m on marketing for Bong Joon-ho’s Mickey 17, it makes perfect business sense to capitalise on that spend via the VOD market while posters are still in cinema foyers. Though audiences haven’t yet lost their conditioning to mistrust straight-to-streaming movies, and a cinema release is more-or-less essential to convince punters they’re about to rent “a proper movie”, the advertising spend of a wide release alone frequently approaches or exceeds the budget of the films themselves. A studio will make more money from 500 $20 PVOD rentals than 1000 $10 cinema tickets – it’s arguably in their interest to drive people to home viewing, especially when plenty also own the subscription-based streaming platforms the films end up on further down the line.
Of course, with all the major streamers (Netflix excluded) also having fingers in the theatrical distribution pie in one way or another, neatly dividing slices of these businesses into the red and the black is trickier than it might look. This won’t stop people trying. As the only revenue segment of the film industry made public almost instantaneously, especially in the US, trade press reports of a film’s success are heavily (read: entirely) weighted towards its box office performance – usually decided within the first 48 hours of its release.
As a result, a glance at the headlines of any major Hollywood publication often makes for grim reading. The loss of residual payments caused by the streaming revolution has caused every major film’s up-front costs to skyrocket to keep legacy talent on-side. It feels, at the moment, like we’re in something of a transitional phase – every headline labelling an original blockbuster a flop provides more evidence for studios to slash the wages of anyone paid above their market rate. The days when Leonardo DiCaprio can command as much as a reported $20m for his role in a Paul Thomas Anderson film could, on this current trajectory, soon be behind us.
Even then, with money seeming to be increasingly funnelled upwards to the studio and streamer level, it’s not as if things are all plain sailing at the top, either. In the trade press, Warner Bros’ financial woes have come to overshadow those of the wider industry. With a genuinely interesting schedule ahead packed with the kind of original, IP-less filmmaking vocal segments of the audience have been crying out for, the legacy studio is nonetheless looking to James Gunn’s Superman reboot to save a lineup of quality programming almost certain to make significant losses. If a ‘big five’ studio working with the likes of Bong Joon-ho, Robert De Niro, Maggie Gyllenhaal and Ryan Coogler can’t make a profit from non-franchise filmmaking, who can?
This isn’t even to mention terrestrial TV, which is engaged in a losing battle with global streamers for everything from talent to studio space. ITV last year revealed 2024’s biggest drama – Mr Bates Vs The Post Office – had lost the channel £1m. Adolescence – another British social drama once considered UK telly’s bread and butter – debuted on Netflix this month, with writer Jack Thorne joining Wolf Hall creator Peter Kosminsky in calling for a ‘streamer levy’ to save the industry from a wholesale meltdown.
Which brings us back to the streamers, the only segment of the industry which doesn’t seem on the verge of collapse. And how Apple TV+ is losing $1bn a year. Apple is currently valued at $3.74 trillion – they can take the hit. How much longer can anyone else?
