Why Do Streaming Prices All Seem to Rise at the Same Time? Is It Collusion?
Why Do Streaming Prices All Seem to Rise at the Same Time? Is It Collusion?
Customers watched the price of streaming rice precipitously in 2023, and it looks to be happening again this year.
The carefree, salad days of streaming are completely dead. Once upon a time, companies introduced their streaming services at bare-bones prices to try and lure big swaths of new customers, and Wall Street usually rewarded those companies with a better stock price. Today the entire marketplace has changed, and not only are streamers raising prices, they seem to be doing so all at once. But why?
The nefarious answer would be that streaming providers are secretly collaborating to raise prices unlawfully, but there’s no evidence of that happening. There are more simple reasons at play, and below I’ll explain how the onset of new bundles as well as the increased prominence of ad-supported plans are deeply intertwined with the rash of recent price hikes.
Key Details:
- Streamers have had to raise prices as market priorities regarding what makes streaming successful have changed.
- The increased search for revenues has also led to the introduction of more ad-supported plans, as well as bundles.
- Streamers announce price increases in succession in order to blunt customer anger with a safety-in-numbers strategy.
For a long time, streaming services only had to show that they were gaining viewers to satisfy investors. But around 2022, Wall Street decided that it was no longer interested in seeing streamers merely pile up tens of millions of subscribers; providers had to show that streaming was a money-making business, instead of losing millions or billions of dollars per year and ramping up spending regardless.
Disney CEO Bob Iger explained the problem from his perspective in 2023.
“In our zeal to grow global subs, I think we were off in terms of our pricing strategy, and we’re now starting to learn more about it and to adjust accordingly,” Iger said, continuing by explaining that there had been a “disconnect” between how Disney spent its money on content and how it used that content to bring a return on investment. In other words, the company was spending too much on streaming without any clear notion on how to make that money back, and the problem became pervasive in the industry.
Today, the financial positions of legacy media companies show that not all of them weathered the market correction as well. Paramount and Warner Bros. Discovery have fared worst, and a big reason why is that both companies have only their movie studios and linear TV channels to fall back on for revenue. Large and accelerating declines in cable subscribers have meant drastic declines in revenue generated by cable and broadcast networks, and the theatrical movie business still hadn’t fully recovered from the COVID-19 pandemic when 2023 strikes by the WGA and SAG-AFTRA shut down production for months.
To be sure, Disney, Comcast and Amazon have had their struggles making streaming profitable. But those companies have other revenue streams to fall back on — Disney has its parks, cruises, and merchandise to mine for gold, while Comcast is one of the biggest internet providers in the United States, and Amazon makes hundreds of billions from its e-commerce platform and internet services every year. That doesn’t mean these companies haven’t raised their streaming prices, but it does mean they’re in better overall shape while they wait for their streaming segments to become profitable.
Why Price Hikes Have Seemed So Numerous Lately
The conditions discussed above have led to an environment where streamers need to show they’re profitable — and fast. That’s why 2023 and 2024 have seen prices rise so dramatically, and explains why ad-supported streaming plans as well as bundles have become increasingly available in recent months.
It’s easy to assume companies are simply being greedy when they raise prices, and natural to assume some dark, corporate chicanery is to blame. Giant companies often use business practices consumers find shady to make money, and while jumping to the conclusion that streamers are colluding to raise prices at the same time is satisfying, it’s not the most likely answer.
The more basic reason behind the timing of recent streaming price increases is that there’s safety from public opinion backlash in numbers. When Peacock announced in late April that it was raising prices by $2 per month, it drew some ire from viewers, but that anger soon switched focus to Philo’s decision to hike subscription rates in late May, then shifted again thanks to Max’s announcement of a price increase for its ad-free plans in early June.
Now, instead of focusing their anger on just one service, consumers are more upset at the state of the industry as a whole. That gives streamers some cover as they use price increases to steer viewers toward ad-supported plans, which put more money into corporate coffers because even though they cost less to subscribe to, they generate ad revenue in addition to subscription dollars. Max, Disney+, Netflix and Hulu have all raised streaming prices on ad-free plans in the past year, but their ad-supported tiers all stayed at the same rate in order to encourage more viewers to sign up for them, or even downgrade from their existing ad-free plans.
Bundles are another carrot streaming providers are offering to mitigate the stick that is price hikes. Several new intra-company streaming bundles have been announced in recent months, such as the StreamSaver package available to Xfinity customers now, or the forthcoming parcel of Disney+, Hulu and Max. These products allow viewers to save money by buying multiple subscriptions at discounted prices, and a recent survey shows they can enhance profits for providers by materially reducing churn and boosting engagement.
Consumers who were early adopters of streaming versus cable have been loudest in their protestations that price increases have put the two video mediums on equal footing. But streaming providers aren’t philanthropists; they’re in the business to make money, and while they’ll have to take care to keep customers from simply abandoning streaming thanks to rising prices, they’re not likely to pull back on costs now, especially when so many are finally on the cusp of achieving the coveted profitability goal.
Max
Max is a subscription video streaming service that gives access to the full HBO library, along with exclusive Max Originals. There are hubs for content from TLC, HGTV, Food Network, Discovery, TCM, Cartoon Network, Travel Channel, ID, and more. Watch hit series like “The Last of Us,” “House of the Dragon,” “Succession,” “Curb Your Enthusiasm,” and more. Thanks to the B/R Sports add-on, users can watch NBA, MLB, NHL, March Madness, and NASCAR events.