Streaming’s Post-Strike Content Contraction Is Coming 

Running a streaming service is expensive, and the amount of revenue that can be gained is limited. On the cost side, the streaming itself is expensive, and so is the production of movies and TV shows. Nearly every streaming service has spent billions on producing its own, original content.

The reason: fierce competition with other streaming services and with traditional TV for consumers’ favor — and ultra-low interest rates that made debt cheap.

Meanwhile on the revenue side, while total streaming video subscriber numbers do increase (they are currently just shy of 800 million viewers worldwide, according to Ampere Analysis), the days of heady additions during the pandemic are over, and growth rates are now much more moderate. And inflation has greatly reduced the income consumers can devote to subscribing to entertainment services. 

Then there is advertising. Ad spending is a function of GDP — the faster GDP grows, the faster advertising does. However, GDP growth has been anemic, meaning most of the increase in streaming advertising must come from TV budgets shifted into video.  

Yet even at an annual market share loss of 4 percentage points for traditional TV, that’s just little more than $12 billion going into digital — not all of which goes into video, and what does is being fought over by about a dozen services.

The result: a knives-out competition in the face of skyrocketing costs, limited revenues and mounting losses. 

As an aside, that’s also why the writers and actors strikes couldn’t have come at a worse time. Strikers pointed to billions of dollars made in revenue by the big streamers; however, those streamers can’t turn a profit.

Services are now trying to come out on top in this streaming deathmatch by increasing revenue while cutting costs, in the hope of finally hitting paydirt. 

On the income side, streamers are trying try to increase revenue by selling more subscriptions — and by selling them more expensively. Next stop for most services: cutting back on production to save money.  

So far, most streamers have not reduced spending on creating original content, save for Hulu and YouTube (which stopped production altogether in early 2022, instead relying completely on creator content).  

But the writing is on the wall, and we may see a race to the bottom, in which content gets worse and worse. And our Golden Age of TV, with more and higher-quality content than ever before, will come to an end.

Still, even without actual cuts to production budgets, creating original content has gotten harder. Interest rates for debt are not close to zero anymore but rather around 7 percent. Debt service will reduce the amount of money available for production.  

On top of that, high inflation rates have made production dollars go less far. Streamers will not only have to cut back on production costs eventually but can also produce less content for the same amount of money.  

At first glance, rationalizing the streaming business is a straightforward effort. But cutting back on content production and increasing subscription prices also make a service less attractive to consumers. If there are fewer viewers, there is also less subscription and advertising revenue. Less revenue in turn means there is even more need to cut back on content and increase subscription fees. And so the doom loop continues.  

A shakeout is coming. Likely, the top four — Netflix, YouTube, Disney and Amazon — will be the last services standing, perhaps with a few smaller ones thrown in. Ironically, this will reproduce the latter days of cable — a handful of networks, expensive, with lots of ads and worsening content quality.  

The good news: A smaller industry, with fewer services employing fewer people, will make services profitable and allow for decent salaries. Certainly, an outcome like that is more sweet than bitter for the strikers. 

Karsten Weide is founder and chief analyst of W Media Research. He has 30 years of experience as a researcher, producer and product manager in the advertising, media & entertainment and consumer Internet industries.