The paid streaming sector is in full swing. Netflix, Spotify, YouTube, Apple… Everyone is looking for their model and everyone is also trying to differentiate themselves from their competitors. And things are changing these days: several big players are announcing price changes, sometimes upwards and sometimes downwards.
One of the most trustful and popular streaming services is Twitch. Twitch offers customers a wide variety of functionalities and tools which are very useful for creating content. Top tier streamers who have a big audience actually generate a colossal amount of money because of lots of views. So if you want to create quality content and compete with famous streamers, you have to Twitch live viewers buy.
Spotify, the giant of the music streaming sector, is preparing to increase its prices for the family subscription by two euros. At the same time, Disney +, a new player which is launching in November, finally announces its prices which were eagerly awaited by the sector, and they will be cheaper than the competition: subscription at seven euros in the first European countries which have been announced (this is not yet the case for Belgium).
A few hours later, YouTube (Google group) engages and abandons its paid YouTube Originals offer.
Find the model that works
However, we often talk about paid streaming as the revival of the cultural industry and we have the impression that everyone is groping, that no one has yet finally found their economic model in the sector, or in any case the model that is walking.
Not everyone has the same goal when launching their platform. There are some for whom streaming is just a loss leader, a sort of bait for the customer. For example, when Apple launches its platform, it is to have content to watch and listen to on its tablets, on its iPhones or on its computers to give value to these devices, and therefore to boost sales.
When Amazon launches its streaming platform, it is to attract customers to its Prime subscription plan. When telecom operators launch their streaming offers, it is to expand their digital television package.
And then, on the other hand, for Netflix or Spotify, streaming is the core business. For Louis Wiart, professor of communication at ULB and specialist in digital platforms, the goals are different, but the profitability objectives are obviously also different.
“For players for whom streaming is only one activity among others, they can afford not to be profitable. The losses generated are offset by gains made in other activities. For other players whose heart of activity is paid streaming, the situation is particularly complicated and their strategy, like that of Netflix, will rather be focused on the long term and possibly, in the future, to be able to truly make their activity profitable. “
These losses are therefore “acceptable” for the moment, but what about the long term? It all depends on who we’re talking about. Those for whom streaming is a loss leader and whose losses are compensated elsewhere, as we have just explained, we imagine that they have made their calculations and that they judge that these losses are acceptable.
For the others, for whom this is the heart of their activity, their calculation is to impose themselves, to manage to be the leaders, even if it means losing at first, hoping to have first place one day. Which is the Netflix model.
“To develop, Netflix goes into debt, this allows it to finance its original content, it attracts and retains subscribers in return, which allows Netflix to post good results and reassure financial investors in order to be able to continue to grow. ‘to get into debt.’
It’s a bit like who will survive the competition as long as possible, as late as possible, and who becomes the first. The sector will skim and one day the leader will be able to afford to increase its prices.