Before the 2020 global pandemic hurt the movie theatre business, media firms explored a business model that would fit the theatre and streaming market. Back then, none of the media companies had an answer to Netflix’s (NFLX) success.
During the pandemic, Warner Bros Discovery (WBD), Paramount (PARA), Apple (AAPL), Disney (DIS), and Comcast (CMCSA) developed a streaming model to grow subscriptions at low rates. All of the firms, including Netflix, began to hike subscription rates. In addition, they cracked down on password sharing. More recently, streaming services are pivoting to an ad-supported platform. This benefits The Trade Desk (TTD), an ad supplier, and Roku (ROKU).
In addition to hiking monthly rates, media suppliers want to offer an ad-supported model. This would generate advertising revenue while consumers may sign up at a lower rate. Markets are unsure if the ad-supported model will work. Customers already pulled cable services to avoid the expensive rates and excessive advertising.
Risks
People who signed up for low-cost streaming services may not want to put up with advertising. To save money amid sticky inflation, they may cancel their streaming services, too. Customers do not have the patience to watch forced advertising after already paying for the service.
Your Takeaway
The DVD will not make a comeback. However, media firms will need to find a balance in their offering that does not result in subscription cancellations.
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