Streaming Revenues Surge While Streaming Apps Stall

The streaming space continues to grow rapidly, as the consumer exodus from cable TV continues. In 2022, the nation’s largest cable TV provider reported record cord-cutting. Yet despite the seeming surge in the streaming business, the biggest businesses in the streaming space continue to struggle.

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Big Media’s Bad Bets

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At the center of the downfall of Disney CEO Bob Chapek is the company’s shift to streaming, with Disney Plus underperforming expectations. This led to the radical move of ousting the CEO and bringing in his predecessor, Bob Iger.

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Telecom giant AT&T jumped into the streaming wars’ arms race in 2018 with its $85 billion purchase of Time Warner. That legendary trove of content that was expected to make HBO Max a must-have. But the service never became the next Netflix, and only a few years later, AT&T is now spinning off Warner Media for about half of what it paid for it, in a $43 billion deal with content rival Discovery, Inc.

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Perhaps no company demonstrates the difficulty of entering the streaming space than Comcast. Amidst a slate of good news—Peacock more than doubling its subscribers to 20 million, and a tripling of streaming revenue—the service still netted a $2.5 billion loss.

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Replicating Costs Eats Revenue

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With streaming revenues growing rapidly, the natural question is where all that revenue is going. The answer is that an enormous portion of it is being eaten up by new costs associated with creating and launching these services. And with each big network or media company maintaining its own streaming service, these costs are duplicated throughout the industry dozens of times in a way that simply wasn’t the case with cable TV or the early streaming landscape.

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In the past, a single distribution channel allowed fewer parties to make those investments in infrastructure, marketing, and the like. Historically that was the pay-TV providers. In more recent years, a handful of streaming services (namely Netflix, Amazon, and Hulu) took on that role in building out the “last mile” via the internet.

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In the early days of streaming, the big media companies essentially outsourced the task of providing VoD to Netflix, Amazon, and Hulu. Now, every company has chosen to build for itself, what it used to be able to rely on others for. But what they’ve failed to realize is that it only worked because those players were able to consolidate the investment.

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Netflix was able to serve as a single point of access for a wide array of content from a variety of sources. For consumers, this worked like a funnel: shows and movies from far and wide were brought together. Now that every network is building their own vertically-integrated solution, that solution looks very different. It’s no longer a funnel that collects content, it’s more of a straight pipe, and thus much less useful to consumers who must now subscribe to multiple of them.

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Higher Costs Cause Consumers to Churn Faster

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Analyst Alan Wolk coined the term “Flixcopalypse” to describe the chaos that was coming for consumers with all the new streaming service launches on the horizon. A market that was once consolidated in three major players was about to become fragmented into more than a dozen.

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Sure enough, “too many streaming apps” has become a perennial complaint for viewers. While the industry failed to heed Wolk’s warning or consumers’ cries, the result has been rapid churn for these new streaming services.

A recent study by Wurl pegged churn rates at between 4% and 7% for all the major streaming apps, with the notable exception of Netflix.

The networks thought each thought that they could grab an easy $6 or $9 a month the way Netflix did. What they failed to realize was that they couldn’t each do so, as that would multiply consumers’ monthly media spending. Consumers have responded with a binge and bounce strategy, hopping between free trials or staying subscribed for only a month or two, watching their fill of a particular app’s content, and moving on to the next one.

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The Path Back to Profitability

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While the problems facing the streaming space are easy to point out, there’s no “undo” option. All that duplicative investment in competing streaming services is already spent, and now represents a sunk cost that further disincentivizes the big media companies from reversing course.

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The question becomes, how can those new platforms (which aren’t going away) be woven together in a way that makes sense for consumers and for the providers? That has long been the very mission of FreeCast, both as a company and a product.

An aggregation platform is what’s needed. One that addresses the key consumer pain-points driving churn: too many streaming apps, and high costs associated with subscribing to all of them.

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For the media companies, the same platform must do what cable TV did before: connect consumers with the content they want in a way that is monetizable. This is the function of FreeCast: we drive consumer eyeballs to the big media companies and their content, and little to no cost to said content providers.

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FreeCast gives consumers a whole suite of tools to manage their media subscriptions and spending, which directly targets some of the most problematic trends in the industry: high customer acquisition costs and rapid churn.