Many of the best streaming services are now profitable. Unfortunately for consumers like you and me, that's thanks to a combination of price hikes, ads and password crackdowns that we shouldn't expect to end any time soon.
This past week, Disney and Paramount joined Warner Bros. Discovery and Netflix as profitable streaming enterprises, per each company's earnings calls (h/t The Verge). Disney Plus had already been profitable as of last quarter, but ESPN Plus dragged down Disney's overall streaming business into a loss. This quarter though, the three streaming services raked in a combined $47 million.
Paramount Plus is also finally profitable after Paramount's direct-to-consumer business generated $26 million in profit this past quarter (h/t The Hollywood Reporter).
Price hikes and ads and crackdowns — oh my
Ideally, streaming services would make money by providing enough shows and movies to earn your dollars. Make enough great content, and you'll have enough subscribers to turn a profit.
Unfortunately, it doesn't work that way. In the early years of the streaming media market, companies flooded services with exclusive, largely ad-free shows and movies and sold them at a price point that would lose them money but bring in subscribers.
Now though, these same companies have shifted from a growth-based mindset to a profit-based mindset and they had to take drastic steps to turn things around.
Netflix, famously, started cracking down on password sharing last year. Instead of causing an uproar and mass exodus, it worked. Some people got mad but the company said in December of last year that it's "completely satisfied" with the crackdown. Max, Disney Plus and Hulu have all announced password sharing crackdowns and Disney announced last week during its earnings call that their crackdowns start 'in earnest' next month.
Disney Plus is a prime example of streaming shrinkflation. When it launched in 2019, Disney Plus cost $6.99 a month. When the next price hike from Disney hits in October, the price will be $9.99 per month, but with ads.
Ad-supported tiers are here to stay too. All of these profitable streaming services — Netflix, Disney Plus, Max, Hulu and Paramount Plus — have ad-supported tiers. The same goes for Peacock, and even Prime Video now charges you $2.99 a month to skip ads.
There are two reasons for this. One, ads make money. PricewaterhouseCoopers recently projected that by 2028, ads will make up 28% of streaming revenue (h/t Variety). But the other reason is it allows these companies to hike their prices — which for the record, they have to do to be profitable — while still offering some semblance of affordability.
Disney Plus is a prime example of streaming shrinkflation. When it launched in 2019, Disney Plus cost $6.99 a month. When the next price hike from Disney hits in October, the price will be $9.99 per month, but with ads. If you want to skip out on ads, you're now paying $15.99 a month starting this October.
To recap, that's either a 42% price increase for a lesser product (shrinkflation) or a 128% price increase for the same product (inflation) since 2019. That was just five years ago. For reference, the cumulative rate of inflation for the U.S. economy was just 22.9%.
The worst parts of streaming are what make money
You may be shaking your fists at your computer (or phone) screen in anger, but again, the problem is these practices are working. These streaming services have never offered less for your dollar and they've also never made more money.
I wish I had a solution here for you at the end of all this, but there's practically nothing you can do to fix this cycle of diminished returns. You could switch away from paid streaming services and start using free streaming services like Tubi, but those lack the latest top shows and movies.
Or you could ditch streaming services for Blu-ray, but in terms of cost per watch, you'll probably spend more than you would even with all these price hikes.
Most likely though, you'll just keep subscribing to these streaming services. The rise in bundles may at least give you some more value than normal for your dollar, but you'll still have to suffer through price hikes, ads and password-sharing crackdowns. Until these companies stop making money, don't expect them to change.
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