Streaming is getting more expensive, but there’s a plan behind it

Rates of streaming platforms are getting more and more expensive. And this pressure is part of companies’ efforts to: 1) reduce losses; and 2) direct users to cheaper plans with ads, which are more profitable.

For those in a hurry:

This is what an analysis of Wall Street Journal, released this week. Vehicle even coined a term for it: “streamflation” (mixing streaming with inflation in English). The report paints the picture in the United States, but in Brazil it is not much different.

inflation continues

The average subscription cost of ad-free plans for major streaming services, such as: Netflix, Disney+ and HBO Max, has increased by nearly 25% in about a year.

The recent spate of price hikes signals a new phase in platform competition. After years of low prices in pursuit of rapid growth, most of the big players are facing a financial reckoning, with losses of tens of billions of dollars piling up.

Now, in the pursuit of profitability, they’re testing their customers’ loyalty, betting that rising prices won’t drive more people to unsubscribe, an industry phenomenon known as churn.

In the US, the monthly rate for the ad-free Disney+ plan, for example, will rise to $13.99, double the price when the platform launched in 2019. Disney was the first company to raise prices twice in one year.

The price hikes come as streaming platforms enjoy larger audiences than ever before. But streaming inflation could push more people to turn subscriptions on and off — to watch only their favorite shows — and switch to lower-cost service options that come with ads.

Still using Disney as an example, there’s one category of platforms the company has left untouched: the ad-supported versions of Disney+ and Hulu, which are $6 and $10 cheaper, respectively.

Overall, the price of most major ad-free streaming platforms is about double that of ad-supported alternatives. The one exception is HBO Max, for now.

Warner Bros. CEO David Zaslav of Discovery has long argued that most streaming services are undervalued due to the amount spent on content.

In 2022, the executive said at an investor conference:

We are not trying to get every subscriber. We want to make sure we get paid and are paid fairly.

Price hikes are just one part of entertainment companies’ strategy to cut streaming losses. They’re also trying to cut costs.

spending cuts

Roy Price, a former Amazon executive who launched the retail giant’s video-on-demand service in 2008, said the platforms are struggling to slash content budgets without sacrificing subscriber growth.

Rich Greenfield, an analyst at LightShed Partners, said the risk of customers switching back and forth between services once they’re done watching a given show is likely to increase due to the rising cost of each platform.

It’s so easy to cancel and go back to streaming services. You subscribe to Disney+ for “The Mandalorian” or HBO Max for “House of the Dragon” and cancel as soon as you watch it.

Rich Greenfield, analyst at LightShed Partners

One way companies can partially protect themselves from customer defections is by bundling their streaming offerings. In Brazil, for example, “combined offers” have begun to appear in recent months: discounts on HBO Max for Amazon Prime Video subscribers, Globoplay bundles with Premiere, Telecine, etc.

Whether or not that will work, only upcoming investor conferences will tell.

Post Streaming is getting more and more expensive, but there is a plan behind it which appeared before in Olhar Digital.

Source: Olhar Digital

Rose

Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.