The Rise and Fall of Streaming

Picture of Roku remote. Stock Catalog via Flickr

For the past five months, you’ve probably heard news covering the ongoing WGA writer’s strike. As of now, a deal is currently being formulated to end the WGA strike. Headlines have mainly covered topics such as the use of AI in writer’s rooms, propelled by the meteoric rise of programs such as ChatGPT.

While this remains an important issue for the strike, a larger platform of the WGA is about residuals when it comes to streaming platforms, a model that has largely replaced cable television, but despite the ever-increasing subscriptions and price hikes production companies are pushing out... they’re not actually making any money.

Netflix changed the film and television industry forever. Digital libraries with a rotating selection of movies replaced the old model of physical video rentals, but this largely didn’t impact cinema releases at first.

The streaming model used to work more or less the same as TV regarding how they got programming. Service providers would pay for licensed content that they are able to afford through subscription numbers. At least, that’s the way it used to work until everything changed in 2013.

This was the year Netflix unveiled the first major original streaming production with the series House of Cards. The show won multiple awards, and soon Netflix would continue to release successful original shows and movies such as “Orange is the New Black,” “Roma,” “Marriage Story,” and, of course, the cultural juggernaut that is “Stranger Things.” As the number of streaming services was on the rise, original content began to act as more of a selling point than licensed material.

Pretty much every production company wanted a Netflix-level streaming service. Soon, competitors such as Amazon Prime Video, Hulu, Tencent Video, Peacock, Apple TV+, and whatever Quibi was supposed to be all stepped into the ring.

While not the biggest streaming services, late 2019-2021 marked the launch of three new streaming services by some of the biggest Hollywood studios: Disney+, Paramount+, and Max formally known as HBO Max before its relaunch in May of this year. These first-party platforms had companies cut back on licensing their content to other service providers in order to build their own libraries. This also had the effect of splitting up what was originally available on one platform.

Despite the greater competition, Netflix maintains its lead, and here’s where we return to my original point. Netflix doesn’t just beat out its contemporaries in terms of subscriber count; in fact, it’s only one of two major streaming services that actually turn a profit, the other being Hulu (There are other services that are considered profitable, but they cater to niche markets with significantly lower subscriber counts than the ones owned by large studios). Hulu also differs from traditional streaming platforms in that it has multiple price plans, including an expensive live TV package.

For all we know, the big three discussed earlier are bleeding money. Congregating all their programming to first-party services means a lot fewer distributing deals, significantly diminishing that revenue stream.

Streaming releases get a portion of subscription revenue based on how many people it attracts to the service, but companies just can’t keep up with the operating costs of running these services. This issue has persisted since all these services launched, but they were expected, not to mention subscription numbers were boosted due to some external factors.

The COVID-19 pandemic was an interesting time for the film industry. Cinema releases seemed impossible, but this was also when companies began to launch their own services. Their solution was to just release new films directly to streaming. Many projects either flopped or were delayed. Meanwhile, people stuck in their homes had plenty of time on their hands to watch things at home. After the pandemic, however, the nice bump in subscribers began to drop as people began to reacclimate to living outside again.

To counter these issues, many of these services are raising their prices or including cheaper subscriptions, which introduce ads to these services. Netflix’s solution was to crack down on password sharing, a tactic that has worked for them. Disney has begun selling a bundle of Disney+, ESPN+, and Hulu, which they consider as separate accounts, therefore boosting their numbers.

And that brings us to where we are today and the ongoing Hollywood strikes and why it’s so important to them. As stated previously, residuals have played a large part in the strikes’ demands. Traditionally, writers are paid in residuals for their work when it airs on television. This is why syndication is so important because that show or movie gets to be “rerun” on different networks and continues to make money long after its initial release. With streaming, writers get no residuals at all.

For the past ten years that have been dominated by Netflix and all that came after it people have been going unpaid for everything that has been produced for streaming. As part of the WGA deal, not only will writers be paid more, but they will also gain residuals based on viewership. This may also have the consequence of forcing streaming platforms to reveal their watch numbers, something that is only revealed when a movie or show hits a certain milestone. The full extent to which these changes will bring is still unknown.

While it’s looking like the WGA will have their demands met, SAG continues to strike. It wouldn’t be too far a stretch to predict that more services like MAX will be folded into one another, and what we’re left with will become more like cable packages. With the direction streaming has gone, the film industry will have to do a lot more than just raise their prices.