Why Streamers are Copying Cable Through the Shows They Produce
By Movieguide® Contributor
With the end of the pandemic boom in early 2022, streamers were forced to shift their focus from subscriber growth to profitability, leading to the cable-fication of the industry.
Now they are further following TV’s footsteps with the content they produce.
For streamers to be profitable, they need a large revenue stream and cheap content. Over the past two years, the focus of the industry has been on the revenue aspect. By raising prices, introducing ad-supported viewing and cracking down on password sharing, streamers have begun to stem their multi-billion-dollar quarterly losses. Netflix, however, remains the only service consistently turning a profit, with the other major players still looking for a boost.
Having maximized the money they are pulling from consumers, the streaming services are now looking to lower their operating costs, a change that will transform the content viewers receive.
With streaming long being pitched as a better alternative to cable, the industry shook up how shows were produced, creating extremely short, six-to-10-episode seasons that were binge-able in a weekend. These shows focus on high production value and at least one big name to bring viewers in.
While this method has led to culture-defining shows, such as STRANGER THINGS and WEDNESDAY, it also comes at a hefty cost with $20 million plus per episode being the norm. From the start, however, consumer preferences have shown that this form of content is not necessarily the largest draw for viewers.
THE OFFICE, for example, was by far one of Netflix’s biggest shows during its time on the platform. Coming from network TV, its cable-length seasons allowed viewers to form much deeper connections with the characters than streaming’s extra-short seasons would allow. Shows like FRIENDS, NCIS and SUITS have continued to prove that network shows have major pull in the streaming industry as well.
Streaming platforms are now paying attention to these shows’ formula, opting to begin creating similar shows of their own with longer seasons and costs-per-episode dropping to the $5 million range.
ER creator John Wells, for example, has been commissioned by Max to create a 15-episode medical drama exclusively for streaming.
“It’s an experiment, to some extent,” said Casey Bloys, chairman and CEO of HBO and Max content. “But if anybody knows how to construct a fairly priced drama that’s well done and gripping, it’s John Wells. The thought was, let’s try 15 episodes and see. Does that keep people engaged for 15 weeks? If you do, that’s a big win.”
Whether consumers like the new content style or not is yet to be seen. However, they will be pleased with the fact that the rate price hikes will likely slow down as streamers look to cut costs to reach profitability rather than place the burden on consumers. Over the past year and a half, every major service has raised its price, with some raising it multiple times in that period, leading many consumers to become fed up with the industry.
Movieguide® previously reported:
As streaming services continue to raise their prices as they struggle to reach profitability, consumers are becoming wary of these changes, leading many to consider dropping their subscriptions.
A new study from the information company TransUnion found that millennials are particularly intolerant of rising prices, with 53% saying they have given up a subscription in the past due to a price hike.
Among Gen Z, “30% of them cancel[ed] more than one service in the last six months and another 30% [told] researchers they had canceled one service.”
This data is troubling for streaming platforms as many are still losing money despite significant price increases over recent years. This is, perhaps, the reason that ad-supported subscription tiers have become mainstream so quickly. They allow the streaming services to offer their libraries at a more affordable price while still generating high revenue per user.
“We’ve long assumed that ad-supported streaming environments can help consumers manage the expense of multiple streaming subscriptions. In this study, we way more than half of consumers canceled their subscriptions as soon as they experienced price increases,” said Julie Clark, senior vice president of the Media and Entertainment Vertical at TransUnion.
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