August 29, 2022
In early January, I wrote a post on our weekly blog about financial resolutions for 2022. It seems that one suggestion was also on the minds of many others – to cut down the number of monthly subscriptions to streaming platforms. According to a poll done by the Wall Street Journal, 20% of subscribers canceled three services or more over the last 24 months.
During the initial COVID lockdowns, many found themselves with limited options for entertainment other than to watch the next movie released on Netflix, Amazon Prime, HBO Max, and Disney plus. During that time, free trials of many new platforms were offered. Paramount Plus, Peacock, and Hulu are examples of platforms that sought to capitalize on the massive increase in demand for content from people seeking an escape from living rooms that had begun to feel like prison cells. With expenses from restaurants, vacations, and Uber rides no longer impacting the budget and stimulus checks adding income, how could another $10 streaming subscription hurt?
Fast forward a year or two, and people are back out and about spending money on their typical pastimes again, only to find that inflation seems to have raised the cost of everything, even the streaming subscriptions they no longer use! Before COVID lockdowns, subscriber growth had trended positively, with the average user spending increasingly more time-consuming video content each year. This led to a production war where the likely winners were those who could churn out content fastest by investing in leading actors and directors. This playbook worked well through the end of 2020. More recently, price sensitivity and competition have forced many players to reevaluate and slow down their spending on developing content.
Netflix has seen subscriber counts fall for two quarters. The resulting concern amongst its investor base led to a 67% drop in stock price from November 2021. Netflix recently announced plans to lay off nearly 5% of their workforce as part of their plan to re-strategize. HBO Max followed suit, announcing the closure of two divisions which made up around 14% of staff to cut costs and focus on core segments. In a more extreme example, CNN+, a subscription news platform that launched in March, shuttered only weeks later as the platform failed to gain subscribers.
The good news for customers who maintain subscriptions to their favorite platforms is that budget reductions should come at the expense of fringe offerings rather than blockbusters. HBO Max reportedly paid $200 million for ten episodes of the Game of Thrones spin-off “House of the Dragon.” That looks like a good investment, given that 10 million viewers tuned in to the first episode. Amazon Prime is expecting a similar result for its highly anticipated Lord of the Rings spin-off, which has a budget of $465 million.
I hope that as users become more selective about their streaming platforms, we will see a move back to quality rather than quantity of content.