Media Companies Spend Billions Chasing Netflix On Streaming
A business strategy that doesn’t seem to work.
The TV industry is facing a tough time. Linear TV is fading, and streaming is growing at a slower rate than predicted. This affects media companies like Disney, NBCUniversal, and other Hollywood giants that have spent billions chasing Netflix. Their streaming strategy now seems to have some significant flaws. An article by Lucia Moses on Business Insider depicts a scary scenario for the TV entertainment business: “For years, the media and entertainment industry bet that by building a sound streaming strategy, they could outrace declines in the legacy TV business. But what if that thesis turned out wrong?”
Standard & Poor’s recently downgraded AMC Networks, raising the specter of default risk while also issuing a warning to other media and entertainment companies. “Four, five years ago, we thought these streaming businesses could all reach profitability. Now that’s looking a lot harder. The bottom line is, the media business isn’t as good as it used to be,” S&P’s Naveen Sarma told Insider.
What happened? The linear TV business is declining faster than ever, while Media companies are slower than previewed in reaching streaming profitability. The remedy is to cut content spending, which means being less appealing to the audience.
It’s the classic dog chasing its tail: continued spending slowdown on content will give people less reason to subscribe. Consumers will start questioning how many services they need, and subscriber growth will slow even more. The break-even point for streaming profitability gets pushed further down the road. “More companies will likely be forced to sell, perhaps to Comcast or Apple. That day could come sooner than people think,” concludes the article.
Source: Business Insider
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A business strategy that doesn’t seem to work.
The TV industry is facing a tough time. Linear TV is fading, and streaming is growing at a slower rate than predicted. This affects media companies like Disney, NBCUniversal, and other Hollywood giants that have spent billions chasing Netflix. Their streaming strategy now seems to have some significant flaws. An article by Lucia Moses on Business Insider depicts a scary scenario for the TV entertainment business: “For years, the media and entertainment industry bet that by building a sound streaming strategy, they could outrace declines in the legacy TV business. But what if that thesis turned out wrong?”
Standard & Poor’s recently downgraded AMC Networks, raising the specter of default risk while also issuing a warning to other media and entertainment companies. “Four, five years ago, we thought these streaming businesses could all reach profitability. Now that’s looking a lot harder. The bottom line is, the media business isn’t as good as it used to be,” S&P’s Naveen Sarma told Insider.
What happened? The linear TV business is declining faster than ever, while Media companies are slower than previewed in reaching streaming profitability. The remedy is to cut content spending, which means being less appealing to the audience.
It’s the classic dog chasing its tail: continued spending slowdown on content will give people less reason to subscribe. Consumers will start questioning how many services they need, and subscriber growth will slow even more. The break-even point for streaming profitability gets pushed further down the road. “More companies will likely be forced to sell, perhaps to Comcast or Apple. That day could come sooner than people think,” concludes the article.
Source: Business Insider
Share:
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