Echoing other sectors, we’re seeing price hikes and new revenue streams compensate for slowing growth in the streaming sector.
Ever since last year, when Netflix was prompted to reshuffle its offering after suffering its first net loss in subscribers, all of the streaming companies have been undergoing something of a reset. The desire for growth at all costs has been superseded by the need for profitability, and as a result of that we’ve seen some streamers raise prices and introduce lower-priced subscription tiers with advertising in an effort to retain users and slow subscriber churn.
In terms of base profitability, the moves seem to have worked so far, with the UK streaming sector reporting revenue growth last year of 21.5%, even in the face of the problems we mentioned above. Of course revenue is not the same as profit, and with the exception of Netflix many of the other streaming platforms – such as Disney+ – that haven’t amassed the same market share, continue to struggle to find a path towards profitability.
Whilst yet another annual revenue increase (in the UK at least) will be welcomed by these companies, it’s not all good news. Household viewership of streaming services dropped slightly from 68% to 66% between the beginning of 2022 to January of this year, whilst subscription take-up also slowed.
In short, revenue is significantly up because of price hikes, advertising adoption and decreased spend on TV and film production, rather than because of growth. When viewed through that prism, it offers a more worrying picture for these companies. You can only raise prices and cut spending so much before you lose customers.
Unless the sector finds a way to renew growth, there will likely be more measures like cost-cutting and password-sharing crackdowns enacted, all of which continue to detract value from the product. It’s a tricky situation for streamers, with the situation in the UK being reflective of the turmoil they are facing in many major markets around the world.
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