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I’m always fascinated by businesses with cool ideas but few if any profits. Uber, for example.
The ride-sharing company reported a 72% increase in third-quarter revenue last year, showing that customers liked the service. But it also posted a net loss of $1.2 billion.
The business model seems to be: losing your way to success.
And that brings us to streaming services, which have played a huge role in people’s lives since the darkest days of the pandemic.
On Thursday, Peacock, the streaming arm of Comcast’s NBCUniversal division, said its subscriber numbers and revenue grew in the fourth quarter of 2022, showing that customers liked the service.
But Peacock also said it expects to lose about $3 billion this year.
It isn’t alone. Most heavyweight streamers, including Disney+, are losing money as they invest big bucks in new content.
This suggests the economics of home viewing aren’t penciling out. In essence, most of the services cost more to operate than they take in from subscribers and advertisers.
Which means they’re priced too low for their overhead.
Which means streaming costs will almost certainly continue to rise.
HBO Max was among the latest to reach deeper into subscribers’ pockets, raising the price of its ad-free service to $16 a month from $15.
Most analysts say streamers will have to continue raising rates if they want to continue investing in the high-profile shows and movies that attract new viewers.
And that raises the question: What’s a fair price?
Fifteen bucks a month has been the rough benchmark for the big guys. But that’s obviously not enough in light of current operational expenses.
This has many analysts suggesting that $20 a month probably will be the target for big streamers.
However, with prices that steep, many consumers will be unable to subscribe to multiple services (as they do now), and a shakeout will follow as the streaming universe shrinks or consolidates.
Savvy viewers will subscribe to only one or two services at a time, exhausting all available programming before canceling and switching to a different streamer.
This may prompt streaming companies to follow the example of cable companies and seek to lock in people with annual rates that come in a bit below monthly prices.
However it plays out, it seems a safe bet that whatever you’re paying now for entertainment, you’ll be paying more in coming months.
Oh, and you’ll be paying more for Uber as well.
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