Have you ever woken up, cloudy-eyed and exhausted, after binge-watching until the wee hours of the morning? It was 2022 for the streaming TV industry.
And now we are paying the price.
Prior to this year, Netflix’s decade of uninterrupted subscriber growth attracted nearly every major Hollywood entertainment company (and some major tech companies as well) to embrace streaming as the future of television. Disney and Apple launched their streaming services in 2019. HBO Max and NBCUniversal’s Peacock joined the fray in 2020. Paramount Plus and Discovery Plus racked up in 2021.
These so-called streaming wars have brought many benefits to consumers. Eager for your membership, new services launched with big budget content at low prices. Some offered promotions that lowered the cost even further. For much of the pandemic, a parade of theatrical films aired the same day they hit theaters, sometimes at no additional cost.
But now subscription prices are rising: The latest hike hit Disney Plus members on Thursday, after Apple TV Plus and Hulu increased in October and Netflix hiked prices in the US earlier this year. More crackdowns on password sharing are on the way. And ads appear on streaming services where binges were always ad-free before.
This year has brought the costs of fighting to the surface. Next year, battles between these giants will likely reveal its first casualties. The question is how much you can suffer too.
For the companies involved, it’s a high-stakes fight. In the race to catch up with Netflix’s now $17 billion annual budget for shows and movies, new competitors have poured their own billions into rival services. Spending $10 billion a year on original programming is essentially the entrance fee for streaming’s big leagues, Jason Kilar — a CEO who launched both Hulu and HBO Max — said this week.
But this year, Netflix’s growth freight train — the one that had dragged all of Hollywood into streaming — hopped off the tracks. And then, everywhere, everything started to go off the rails.
In the first half of 2022, Netflix reported its first subscriber losses in a decade. When the company reported 200,000 lost accounts in April, 30% of Netflix’s market value evaporated overnight. Three months later, another 970,000 subscribers were gone.
Reeling from something of a corporate identity crisis, Netflix coped by throwing headlong into radically different strategies, some of which had been rejected for years.
Even before disclosing its membership drop, Netflix began testing password-sharing fees in a few counties. His crackdown will begin to roll out more widely next year, aiming to get an estimated 100 million people to pay after hoarding someone else’s account.
Just six months after reporting declines in subscribers, Netflix has introduced a new cheaper tier with ads, having normalized ad-free monitoring as the de facto model for streaming. And it’s testing the waters with live programming, another first. He has a comedy special chris rock live scheduled for early 2023, and Netflix is said to be flirting with add live sports too.
Yet before any of these new measures could make a difference, its subscriber losses had already reversed. New members who have joined since June have more than made up for those lost in the first six months. Although it is expected to end the year with its weakest streaming subscriber growth since the days when DVD-by-mail was still a major part of its business, Netflix’s programming is finding massive audiences: three of its five most-watched shows have aired. This year. (The other two were released in late 2021.)
But most of the damage has been done. Netflix’s dwindling membership sent shockwaves through Hollywood, kicking legs from the presumption that a big streaming bet would mean jackpots later.
The Disney frenzy goes too far
Disney had long warned investors that its gamble on streaming would be costly, but the Disney CEO didn’t expect it to cost him his job.
Disney Plus, the crown jewel of the company’s streaming strategy, has become the streaming wars’ most successful fighter. It soared to over 100 million members in early October, beating any other new service. “It took Disney Plus just three short years to grow from fledgling company to industry leader,” CEO Bob Chapek said in November. Less than two weeks later, he was fired.
The sins perceived by Chapek were diverse. Disney analysts, investors and customers pointed the finger: price increases and fees at Disney parks that seemed exaggerated amid record inflation, internal restructuring that hurt morale and complicated bureaucracy, clumsy answers to contentious questions like aand lethargy over the cord-cutting assault on ESPN’s business, once a lucrative profit engine for Disney.
But Chapek’s shortcomings also included a failure to scale Disney’s streaming business to start generating revenue on the billions of dollars poured into it. The company had charted Disney Plus’s peak losses in its 2021 fiscal year. But in the 2022 fiscal year that just ended in October, Disney’s total streaming losses were more than double those of the fiscal year 2021. Losses did not peak last year – they only increased part of the way up.
In a surprise gesture,last month and brought Bob Iger, his predecessor, out of retirement to run the company again.
Still, Chapek was launched just weeks before the rollout of two of its planned profitability metrics for Disney Plus. On Thursday, the service launched its ad-supported tier, setting it at the $8-per-month tier that members could stream ad-free before, while simultaneously increasing the ad-free tier from $3 to $11 per month.
This won’t be the last price increase on your streaming bill.
Fighting on all fronts
Netflix and Disney Plus weren’t the only services plagued in 2022.
HBO Max is in upheaval, after its ownership changed yet again. In April, HBO Max became the property of newly formed Warner Bros. Discovery, a fusion ofwho . With a mountain of debt and Discovery’s famously frugal CEO David Zaslav as leader, Warner Bros. Discovery has canceled a long list of HBO Max shows and movies, including a which would have cost $90 million.
And here too, the costs will eventually pass on to you.
Next year, HBO Max will combine with Discovery Plus into one service. In addition to putting prestige fare like House of the Dragon alongside staple reality hits like 90 Day Fiancé, merging HBO Max at $15 per month with Discovery Plus at $7 per month may result in increased price for certain subscribers.
If so, it would join price hikes at Netflix, Amazon Prime, Disney Plus, Hulu and Apple over the past 12 months. Of the major US streaming services, only Paramount Plus and Peacock have yet to increase their prices recently.
And, at least according to Kilar, to be one of the most profitable winners of the streaming wars, the services will eventually need average subscribers around the world to pay around $15 a month.
That may seem like what you’re already paying for for a lot of them. But if you’re in the US, your price will likely have to go up even more to compensate for the lower subscription fees charged elsewhere. In the US, Netflix’s standard tier – its most popular plan – is $15.50 per month. But in Brazil, Latin America’s largest economy, the same plan costs half that. In India, the standard level of Netflix is $6 and you can get a mobile-only plan for less than $2.
For a global service to average $15, subscription prices will have to rise everywhere.
Some of 2022’s struggles seemed to work in favor of streaming customers, like Netflix’s new ad-supported tier. Launched in November, it’s been the cheapest way to unlock its service for years. But even here, a sharp right hook is about to land soon after. Early next year, Netflix will start cracking down on password sharing with new fees. After years of relatively lax enforcement, new account sharing fees “will be a big priority” in 2023, Netflix co-CEO Ted Sarados told a UBS conference on Tuesday.
“Just like a price increase, it doesn’t make anyone so happy,” he conceded.
So go for it, while you can still afford it. And then, if you can’t, at least maybe you’ll catch up on some sleep.