The Streaming Wars: Unraveling the Economics of Today's Hollywood

Resilience Amid Chaos: Streaming's Future

Just over a year and a half has passed since the watershed moment known as the Great Netflix Freak-out, a time when the streaming juggernaut experienced its first subscriber loss, sparking cataclysmic predictions that the traditional television model was facing extinction.

In the ensuing months, it became apparent that while the entertainment industry was indeed grappling with a fractured business model, the era of streaming dominance was far from over. In this blog, Hollywood Branded unravels the economics of today's streaming wars.

A Turbulent Transition

In the wake of the Great Netflix Freak-out, Hollywood experienced a tumultuous wave of change. The shockwaves of this incident prompted introspection and transformation across the entertainment landscape. As traditional television grappled with its identity, streaming platforms continued to gain ground, ushering in a new era of content consumption.

A Disconnect in Monetization

The conventional equation of television success was straightforward: higher viewership translated into higher advertising revenues and potential syndication deals, a boon for creators. However, streaming obliterated this established paradigm. With fewer advertisements and limited platform availability, the once-critical connection between ratings and financial gain was severed.

Navigating the Financial Maze

Despite amassing colossal global viewing hours, the financial footing of streaming services remained precarious. The aggressive content expansion undertaken by many platforms led to substantial debt accumulation, and subscription fee growth fell short of bridging this chasm. While revenue was being generated, it paled in comparison to the heyday of cable television, when entertainment companies thrived.

A hit show on Netflix doesn’t equate millions of additional subscribers. Sure, the overall brand awareness for Netflix rises and the PR value of another great show is there, but the ROI on the production cost of that hit show doesn’t equate to additional subscribers. So, hit or not, these streamers are still left in the red.

The Digital Transformation of Hollywood

The past decade witnessed a radical transformation as Hollywood's established networks and studios underwent a digital metamorphosis. Traditional entities reinvented themselves as digital platforms, driven by the hope of greater prosperity. We saw NBC’s launch of Peacock, Paramount’s launch of Paramount+, HBO’s HBO Max is now just Max, Amazon Prime, Apple TV+, Disney+, and the list goes on.  

This digital shift led to an exponential increase in original scripted series, skyrocketing from 210 in 2009 to a staggering 599 in 2022. Yet, beneath this outward exuberance lay a fundamental unsustainability. With more options for viewers, comes more competition for these streamers. Audiences are no longer rushing to give their money to the latest streaming service on the market, yet these streamers need to pay millions in order to keep their platforms stocked with good content.

The Warning Signs

Early 2022 marked the emergence of fissures within the industry. Netflix's shareholder letter contained a subtle acknowledgment of "added competition" affecting growth, prompting a cascade of investor concerns. The revelation of Netflix's subscriber loss, the first in the company’s history, triggered a single-day plummet of over $50 billion in market value, highlighting that the problem extended beyond the streaming behemoth itself—a reckoning had begun.

The Far-reaching Impact

This streaming correction rippled through the industry, leaving no platform unscathed. Wall Street's attention shifted from subscriber growth to profitability, inciting panic among competing streaming contenders. The aftermath witnessed layoffs, budget slashes, and merciless cancellations. Even prestigious projects faced the axe, such as J.J. Abrams's ambitious sci-fi endeavor, HBO Max’s Batgirl. Our agency experienced this firsthand. There were easily over twenty projects we were being pitched that streamers just canceled overnight.

Survival of the Fittest

As the industry grappled with its tumultuous landscape, networks, and streaming platforms pivoted towards reliability over risk. Reinvigorating familiar intellectual properties (IPs) with pre-existing fan bases is becoming a dominant strategy (Warner Bros.’s series adaptation of Harry Potter, Lionsgate’s Twilight series, Billions spin-offs, etc.). Hollywood's ecosystem evolved into a stark "survival of the fittest" scenario, prompting mergers and strategic rebranding to ensure longevity and popularity in the rapidly transforming landscape.

A Glimmer of Hope

Despite the challenges, a glimmer of optimism emerges on the horizon. The ascent of Free Ad-supported Streaming Television (FAST) channels like Tubi and Pluto TV has inspired a return to content windows. These platforms provide opportunities for shows that were previously confined to singular streaming realms to reach larger, more diverse audiences, and hopefully additional revenue streams for the production teams. This shift implies a future where hit shows can once again generate multiple revenue streams—a far cry from the current single-platform limitation.

From Chaos to Progress: Hollywood's Journey

The Great Netflix Freak-out serves as a historic turning point in the entertainment industry's narrative. It illuminated the inherent fragility of the streaming business model and catalyzed a transformation that continues to reverberate. Hollywood now stands at a crossroads, where traditional networks and streaming platforms must reevaluate and recalibrate their strategies to survive and thrive in the evolving landscape. While the path ahead is riddled with challenges, the industry's legacy of adaptation and innovation will undoubtedly guide it toward a reimagined future.

Eager To Learn More?

The goal is that this blog has not only kept your attention but left you wanting more! So if that's the case, check out some additional articles below:

• Let's Talk Streaming
• The Inevitable Streaming Wars
• Netflix's Plan To Diversify The Entertainment Industry
• Pop Culture Marketing: Navigating Brand Partnerships Amid Hollywood's Double Strike
• HB Roundup: Celebrity Brand Partnerships

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