US VIDEO streaming companies are joining forces to attract new viewers, boost ad sales, and finally turn a profit – something only Netflix has managed to accomplish so far.
Be it Disney Plus, Hulu, and Max, or ESPN, Warner Brothers Discovery and Fox – the streaming world is reshaping into unlikely alliances.
The sudden team spirit is all about the bottom line, with Netflix the only streamer that has managed to cover the exorbitant production costs of keeping users hooked.
Netflix’s great run carried on in the second quarter as it continued to gain millions of subscribers and turn billions of US dollars in profit.
In 2024, holding multiple streaming accounts can cost more than an old-school cable or satellite package whose high prices, stretching into the hundreds of US dollars, helped chase viewers into the arms of Netflix in the first place.
For Jeff Shell, soon to lead the new Skydance-Paramount Global group, subscribing to a whole bevvy of platforms is no longer tenable.
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“I don’t think it takes rocket science to project that the consumer situation is not sustainable,” he said.
These bundles aren’t just about saving customers money, they are a smart business move too, experts said.
“Bundling reduces churn,” explained Mark Boidman of Solomon Partners.
“If you are going to subscribe to one or two streaming services because they have a show that you want right now, it’s very easy to just unsubscribe” once you are done, he said.
With bundling, you will think harder before pulling the plug, Boidman added.
One example is TV and Internet giant Comcast’s new StreamSaver package.
For US$15 a month on top of your cable TV or Internet bill, you get Peacock, Netflix, and AppleTV+ – all for a price 35 per cent cheaper than buying each service separately.
Disney+, Hulu, and Max are expected to offer a similar joint discount by late 2024.
“The core business question is ‘Do I make more money from the new customers or do I lose money from the customers who’” are underpaying, said Michael Smith, professor of information technology at Carnegie Mellon University.
Netflix aside, streaming remains loss-making for all the major platforms, from Peacock to Max, as well as Disney, which is promising a return of its Plus platform to the black in the fourth quarter.
The alliances will group more viewers and attract advertising, which is back in favour, including at Netflix.
Alliances will enable them to aggregate audiences that can be targeted by advertisers, “which could be very valuable”, said Boidman.
Smith warned that “the challenge is going to be figuring out who gets access to the data and how do you share that data” between partners.
“If you split up, who keeps it?” Smith added.
Teaming up can also give an advantage in buying content.
ESPN, Warner Bros Discovery and Fox have given few details of their collaboration, which is to result in a dedicated sports platform.
Sports rights can be extremely expensive, but working together is likely to offer platforms extra leverage in negotiations with leagues and event organisers. AFP
