In the short term, we will see some nice changes in the content offering and the streaming industry. In the meantime, however, let's enjoy the spectacular new productions that we can reach immediately with the blink of an eye.
On Prime Video's Amazon September 2 has arrived”The rings of power“, by Tolkien, the most expensive production in the history of the moving image. In fact, it is estimated that the production cost 1 billion dollars, three times as much as it took for Top Gun: Maverick. While HBO Max (in Italy Sky and Now TV) offers us the prequel to the super-blockbuster "Game of throneswhich is called House of Dragon, also by George RR Martin.
For his part Disney plus is about to send the series to the screens “Star Wars: Andor” which will be joined by a series of programs that include, among others, the remake of Pinocchio, a spinoff of Cars the classic Pixar and She-Hulk, which deploys the homonymous character created by Marvel. As spectators we can only rejoice in these offers included in our subscription without the need for any supplement. Will last? Probably not, the party could end with this avalanche of scheduled news when the streamers looked like the All Blacks, who are also in crisis today.
Platforms on the defensive, streaming has peaked
Streaming entrepreneurs and their investors can be pleased too: in America last July, streaming achieved a slightly higher share of viewers (34,8%) than cable pay TV (34,5% ). It's the first time it's happened a historic breakthrough, a crazy achievement.
By now, however, there is a widespread belief that streaming has reached its peak and certainly will not be able to replicate the growth rates it has had recently, especially during the pandemic. Some specialized observers, and consequently investors, are starting to believe that the streaming business model, of which Netflix is the compendium and the model, is no longer sustainable from an economic and profitability point of view. According to Wall Street, the time has come to make money rather than work tirelessly to reach new subscribers. From this awareness also comes the frightening loss of capitalization of Netflix which has seen 200 billion of value taken away in a few months.
There are also enormous pressures on Disney which has also made a feat with Disney Plus by surpassing the number of Netflix subscribers. They are mostly from activist investors like Carl Icahn to spur the house of Mickey Mouse to put his hand to a new economic model of streaming.
Amazon and Apple are less invested by this turbulence because Prime Video and Apple TV+ are, ultimately, ancillary businesses of the multiple activities of the two giants. They can afford to trade at a loss.
Cinemas and the rebirth of the sector thanks to partnerships
It is not that the operators that manage the cinemas are much better off or benefit from the loss of appeal of streaming. People are back in theaters but we're still under pre-pandemic levels which were already stagnant.
The second largest chain of cinemas, cineworld, is on the verge of bankruptcy and must immediately find the resources to face the 9,5 billion euro debt. AMC, the largest chain in the world, is even more indebted and has been on the front pages of the newspapers not for its activities, but for having become a sensational case of "meme stock", i.e. speculative action trend among traders and non-professional investors.
Cinema managers have spent years fighting hard against the streaming revolution, now it happens that they are starting to look at Netflix, Apple and Amazon with different eyes, as possible partners to start the revival of the ailing industry.
John Fithian, director of the National Association of Theater Owners, told the "Financial Times" that negotiations are underway with Apple, Amazon and Netflix for a theatrical release of their films and that there is "some optimism" about an agreement .
“All three of these companies are considering larger theatrical releases,” Fithian said. That would be a wallet we've never had before. I think in 2023 we will start to see something”.
A shaky system. Inflation and cost of living affect spending on streaming and cinema
Underlying this state of affairs is the well-founded concern that inflation and the cost of living could seriously affect the spending of consumers/viewers on luxury goods, which also include entertainment and culture. An expense, that for i online services, which, moreover, has assumed considerable proportions in the family budget.
The “Financial Times” reports the opinion of Niels Juul, who was executive producer of Martin Scorsese's film, The Irishman, financed by Netflix. “Everyone in Hollywood thinks big. But subscribers are so overwhelmed they're looking at their monthly bills and saying, 'I need to cut something, I've got $140 worth of subscriptions here!'” Yet it is precisely consumers who benefit most from the streaming embarrassment. However, it happens that, although subscribers are doing a great deal, a recent analysis by Morgan Stanley, reported by the "Financial Times", estimates that the annual influx of new subscribers to the platforms will go from 160 million in 2020 to 60 million in 2025.
A considerable downsizing and worrying given that some streaming services, such as Disney and Warner Bros Discovery aiming to reach break-even in 2024. Then the whole system starts to falter.
The change of strategy of streamers: no more "binge vision"
How do streaming services plan to cope with this new state of affairs? Disney and Netflix are planning a increase in subscription fees and working on the introduction of new advertising-supported service access layers.
They want to offer consumers a cheaper option in a context of fierce competition and rising inflation. For this purpose Netflix has already started a cooperation with Microsoft. We'll see something soon. Even free account sharing between family and friends may come to an end and only be offered for an extra fee.
All platforms, to a greater or lesser extent, are putting an end to the costume of binge viewing, i.e. visual marathons, for news. The episodes of the major series already arrive one or two a week (usually on Fridays) and no longer all simultaneously.
Warner (HBO Max), on the other hand, has implemented significant cuts and other "aggressive course-correcting measures" with the aim of achieving at least $2024 billion in savings by XNUMX. The new director David Zaslav shocked Hollywood by putting an end to the Batgirl mega-project, a $90 million production.
Crackdown on the originals
Despite the sharp slowdown in the acquisition of new subscribers, streaming platforms they will continue to invest until 2023 the huge resources programmed in the production of original contents.
In the coming years this productive effervescence will subside in the face of the need, not so much to extend the audience, as to maximize the revenues that can be squeezed from the existing subscriber base. But even here there is a significant problem, especially for pure streaming services such as Netflix, HBO Max, Hulu and Disney Plus.
He explains it well to the “Financial Times” Niels Jul: “If they intend to compete with Apple and Amazon, which have an unlimited amount of resources that come from other businesses, the reduction of budgets becomes very complicated in the sense that it is no longer possible to recruit the great talents because their fees can no longer be paid . What then will they resort to? To independent films with budgets of 12 million dollars? I'm sorry, that train has already passed”.
The game is all about blockbusters. Therefore, the independent productions that had characterized the wave of streaming in a positive way, giving space to a certain, will be penalized auteur and quality cinema which did not find space, precisely for those reasons, in productions intended for cinemas. The rewards for producers expected by the platforms are also tightening. Where once a project could carve out a 20 or 30 percent margin, now that share tends to be no more than 10 percent.
The rise of reality TV
Another trend already perceptible in the orientations of streaming services is that towards forms of entertainment of the television genre based on representation of real life situations, not dramatized: the reality show indeed. This is a cheaper and faster production than scripted drama. Netflix has already started experimenting with these unscripted live streaming formats.
Amazon has already experienced its success and acceptance with LOL - Who laughs is out, a 2021 Italian reality show hosted by Fedez and broadcast on Prime Video. We'll just have to wait and see. One thing that is certain exists, however, and that is that streaming is and will remain.
Sources:
- Alex Barker and Christopher Grimes, Big budget blockbusters arrive amid fears of 'peak TV', “The Financial Times”, 25 August 2022
- Christopher Grimes, Cinema operators look to streaming groups to help fill blockbuster shortfall, “The Financial Times”, 3 September 2022
- Alex Barker, Netflix is starting to look more like traditional TV, “The Financial Times”, September 1, 2022
- Anna Nicolaou and Richard Waters, Netflix teams up with Microsoft for ad-supported streaming tier, July 13, 2022
- Christopher Grimes, Disney overtakes Netflix on streaming subscriptions, August 11, 2022
- Brooks Barnes, Disney Considers a Membership Plan to Leverage Its Empire for Disney+, “The New York Times, August 31, 2022
- Ross Douthat, With 'House of the Dragon' and 'The Rings of Power,' We've Entered the Age of Blockbuster TV, “The New York Times, August 31, 2022
- Oliver Barnes and Robert Smith, Cineworld hopes to mount an escape thriller to rival Hollywood, August 27, 2022
- Madison Darbyshire and Alice Hancock, Adam Aron, meme-stock marketer driving AMC's wild ride, March 19, 2022
