The streaming bubble burst and… now what?

Netflix lost subscribers the first quarter of 2022 and then the biggest crisis in its history broke out. Sustained and indefinite growth was a chimera. At Warner Bros. Discovery, after the merger of the communication groups, the reign of David Zaslav began marked by the cancellation of projects in production (and, in some cases, even already filmed) to deduct taxes, not to mention that a rebrand is coming that would bury the HBO Max name shortly.

And while Lionsgate+ disappears from markets like German, Nordic, Japanese, French or Spanish to cut costs, even Disney is having to get their act together seeing that its streaming platform, so competitive a priori, lost 1.5 billion dollars in a quarter. He even ousted Bob Chapek as CEO to resurrect Bob Iger, who had held the job from 2005-2020, to calm shareholder sentiment.

Star Wars series like ‘Andor’ are expensive to produce and, at the moment, they are not profitable with the monthly payments of the subscribers.

Disney+ / Des Willie

These are four pieces of information, but significant enough to understand a change in mentality in Hollywood: the streaming bubble burst in 2022. The idea that every studio had its own platform to make the most of its catalog turned out not to be the gold mine that some predicted: It implied giving up constant income from the temporary sale of rights to third parties, the difficulties of penetrating a market as saturated as that of content and, above all, operating with derisory monthly payments due to the costs derived from audiovisuals.

In this context of crisis, changes can be expected in the audiovisual sector in the United States and, above all, companies have the challenge of demonstrating that, in addition to satisfying the consumer, they have the capacity to operate without red numbers.

The important thing is not the subscribers

Disney+ closed the year with 164.2 million subscribers. These, however, were not the last subscribers to Mickey Mouse: if you add the clients of Hulu, a service in which Disney owns two-thirds of the shares, and ESPN+, a platform focused on sports, the number of subscribers rose to 235.7 million. How can it be that with these numbers the company’s streaming business gave losses of 1,500 million?

When Disney tried to penetrate the domestic market with its own platform, it took a risk: it would offer excessively cheap monthly fees in exchange for getting as many customers as possible. Wall Street bought this strategy, looking at the number of subscribers to judge which platforms led the home audiovisual sector. But this analysis, which fed the bubble, ended: now investors do not look at the volume of subscribers but the income for each of these clients.

More rates with advertising

Netflix was adamant about introducing ad-supported fees to its service. After the stagnation in the number of users and the loss of shareholder confidence, Reed Hastings changed his mind to try to add clients and, in record time, transformed his business model with the help of Microsoft. “I wish we had changed a few years earlier,” he explained to the New York Timeswhere he recognized that Hulu, which has always offered subscription modalities with and without advertising, had shown them the feasibility of the maneuver.

Disney + is another that follows these steps that, it must also be said, are not groundbreaking in their market of origin. The Peacock and Paramount+ platforms, which are owned by Comcast and Paramount Global, also offer ad-break rates, following in Hulu’s footsteps. And, taking into account that Hulu once had 70% of customers subscribed to the cheapest rate with advertising, companies have reasons to offer this modality.

Contents to third parties

Westworld and SWAT: Harrelson's men, among our recommendation for this Thursday

Promotional image of ‘Westworld’

LVD

One of the most controversial decisions of 2022 was that of Zaslav to eliminate his own productions from his catalog: he started with original series produced in Europe on HBO Max and later affected American content such as generation, Minx, love life or a star series like Westworlddeveloped from the HBO channel.

The surprise? See that the maneuver does not go wrong: SkyShowtime has bought the rights to the European production to disembark in Europe, thus contributing to Warner Bros Discovery with benefits that it was not going to enter, while it looks for a way to monetize Westworld on a FAST channel, as free streaming TV channels like Pluto are called.

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‘Foodie Love’ by Isabel Coixet, an HBO exclusive series, was withdrawn from the HBO Max catalog and its rights have been sold to SkyShowtime, which lands in Spain in February.

Third parties

Streaming had led to inbreeding and the development of fiction to be broadcast exclusively and for all eternity on the studio’s content platform. Let’s remember Netflix’s obsession with producing in order to have its own catalog and compensate for the fact that they could acquire fewer and fewer third-party series. But let’s get ready for a new era in which platforms will temporarily cede the rights to their titles to third parties for additional revenue.

The end of star contracts?

(FILES) This file photo taken on May 3, 2017 shows Director JJ Abrams attending the Hulu Upfront Brunch at La Sirena Ristorante in New York City. Abrams is to direct

The contract to have JJ Abrams tied up at Warner Bros. has not proven very prolific.

Kena Betancur / AFP

Perhaps Ryan Murphy managed to justify his $300 million Netflix exclusivity deal at the last minute by creating Dahmer Y Vigilant, but in this new era of savings, platforms may not offer blank checks as easily. You just have to see, for example, that Jonathan Nolan and Lisa Joy signed for about 150 million to work for Amazon Prime Video and, for now, the movie Reminiscence and the series The Peripheral They have gone unnoticed at all levels. Or JJ Abrams has been at Warner Bros since 2019 for 250 million and the studio does not buy any of his projects for HBO Max.

The marathon is no longer the goal

Netflix broke into the market with the premiere of the first season of house of cards, fully available to platform users on launch day. But, while Reed Hastings maintains that the marathon is his business model, the other platforms are not so clear: Disney + and HBO Max opt for the weekly broadcast so as not to burn their star proposals in a few days and delay the arrival of original content on its catalogue, Amazon Prime Video decides based on each series, although strong bets such as The Lord of the Rings: The Rings of Power either The Boys They were broadcast week by week, and Apple TV + also opts for this model.

The most interesting thing, moreover, is that even Netflix seems to be slowly opting for a more gradual broadcast: stranger things booked the final two episodes of the fourth season for a month after the season premiere, ozark broadcast its season divided into two parts and Sandman aired its season finale on a delay. At the moment, the managers deny a drastic change in their broadcast model, but let’s remember that they said the same about advertising.


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The season cost around $270 million.

The closure and merger of platforms

“The future points to mergers or to platforms that, without having to merge, are unified simplifying the offer,” says Francesc Bracero, a technology journalist for this medium. “There are people with muscle, like Apple, who can afford – due to their large number of money accumulated- maintain your line of fewer productions and more quality. They don’t care that the subscriber base is the smallest if then they are on everyone’s lips with severance either ted lasso”.

“The example of Paramount with Comcast and HBO Max-Discovery seems like a trend that will continue. Movistar+ and DAZN are sharing football because it doesn’t pay off alone. It seems that the models of the future will tend to establish this type of alliances and others that involve sharing the rights of the productions, either distributing them in different calendars or even simultaneously ”, she reflects.

What will happen to 'The Great', so far available on Lionsgate+?

Starzplay changed its name to Lionsgate+ and days later it was announced that it would stop operating in Spain.

Starz

And, on the other hand, the American audiovisual industry sets its sights on a service like Peacock, which despite belonging to Comcast via NBCUniversal, has trouble expanding into the US market. AMC, which has begun a restructuring and cutback process that, as some media indicate (could it be focused on becoming a more attractive and healthy asset to be acquired?); or that Lionsgate that stops operating as a platform in Europe and Japan. Can they follow in the footsteps of Quibi, which was sold as a disruptor to mobile content consumption and closed months after launch, stoning nearly $2 billion?


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The streaming bubble burst and… now what?