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Streaming services are more significant than ever. By the summer of 2023, these services commanded 38% of television viewing, larger than traditional cable’s 31%.
This surge in viewership has forced all the large media companies and Hollywood studios to invest in different platforms. American households subscribe to an average of four streaming services. When streaming services came to the forefront, they were marketed as cheaper than traditional television options. As time has passed, the cost of streaming has increased, reaching heights where the gap in price point has closed up. Along with this, streaming companies have also launched new ideas to grow and retain their subscribers.
The pattern of price increases started in 2022 when Netflix lost subscribers for the first time in 10 years. In the second quarter, their subscriber numbers dropped by one million. The unexpected drop in subscribers caused harsh reactions across the industry. This sent Netflix’s stock down 35% in a single day. Attributing to the drop in subscribers was the new competitiveness in the industry. Traditional streaming giants have started their own streaming services. Some examples include Disney creating Disney+ and NBC creating Peacock. Most of these services have seen significant increases in subscriptions over the past few years.
Now that a steady subscription base has been established, these companies have all increased their prices gradually over the past few years in order to drive profit margins. For example, Disney+ was created with no base price and had a $6.99 ad-free tier. Nowadays, the base price is $9.99, and the ad-free tier costs $15.99. Paramount, another television giant, saw revenue increase by 16% in the second quarter of 2024. This was attributed to the streaming services Paramount+ and Pluto TV.
While the patterns of increasing prices have attributed to more significant revenue gains in the entertainment industry, other ideas are also contributing to rising profits. In 2024, Netflix started a crackdown on password sharing. Password sharing is sharing passwords between different houses, having multiple people or houses on the same streaming service. By introducing a location lock, Netflix wants to increase its total user count.
Other companies, such as Disney and Warner Bros, look to follow suit in their respective apps. Another industry tactic to help retain subscribers is to offer subscription bundles. Disney provides a Disney+ Hulu bundle and another bundle that includes Max. Another example is Comcast’s Xfinity Streamsaver bundle, which packages Peacock, Netflix, and Apple TV+. These packages decrease the probability of customers unsubscribing and also increase the value of marketing on the different streams.
Streaming services have become a typical monthly bill over the past decade. With most households paying for multiple services, increasing prices has become a contention as they have gradually happened. As companies look to cash out on the normalcy of streaming services, other actions are also taking place to find the profit margins across the industry. As location locks and subscription bundles continue to pop up, it will be interesting to see what other changes face the relatively young entertainment sector as it continues to be prominent.
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