The streaming economy has exploded in the last 10 years, but its growth really accelerated during the pandemic. Due to the closure of movie theaters, more Americans opted to stream movies from home. That trend has stuck. A report from the Motion Picture Association showed that in 2021, the digital movie market accounted for 72% of the combined theatrical and home/mobile entertainment markets, compared to 46% in 2019. In 2020, subscriptions to streaming services jumped 14%, reaching a global total of 1.3 billion subscribers — a record high.
However, with all this success, many still have concerns about the stability of the streaming economy. In December 2022, HBO Max canceled, un-renewed, or removed a number of shows from their platform. Fan favorites like “Westworld,” new original programs like “Love Life,” and even some shows renewed for a second season like “Minx” were all cut from the platform. This adds to the fact that Netflix, the industry leader, lost more than 1 million subscribers in Q2 of 2022.
So what does this mean for the streaming economy’s future? Should consumers be concerned? Marketplace host Kai Ryssdal spoke with Luis Cabral, a Paganelli-Bull Professor of economics and international business and the chair of the Department of Economics at New York University, about the current state of the streaming economy and what the future holds.
The following is an edited transcript of the conversation.
Kai Ryssdal: Give me a primer, would you right now, on the state of the film industry — streaming, physical copies, you name it. What’s your sense?
Luis Cabral: Well, my sense is that production is much more fragmented than it was 20 years ago. In other words, independent producers have risen yet, and they are now a great number. And the distribution, of course, has changed greatly from 30-40 years ago from theatrical distribution to primarily streaming. That’s another big shock in the industry in recent years.
Ryssdal: So, yes to all of that. Let me ask you, though, about the business imperative now of some of those streaming services. If you look at HBO, Max, right, owned by Warner Brothers Discovery, and if you look at Netflix, they are now challenged because of — to steal a phrase from Fareed Zakaria — the rise of the rest, right? Netflix was doing great for a very long time, and now everybody else has a streaming service. HBO Max was doing great, but now everybody’s got a streaming service. There is some degree of cannibalization happening here, right?
Cabral: There is a lot of cannibalization. And there’s also a lot of fragmentation. You know, some people are beginning to long for the old days of cable. Because you know, with cable, you know, you had one provider. You had 100 channels, you only watch two or three of those. So that was bad, because we’re paying for a lot of channels you weren’t watching, but at least you knew where to go. Now, it just became a little chaotic. So to me, if you asked me about the future, I think there’s some element of coordination and consolidation that’s waiting to happen. It’s going to have to happen sooner or later.
Ryssdal: Do you have concerns about streaming as a business enterprise at all?
Cabral: Well, the way things have happened in recent years, I think it’s turning into a very high-stakes and high-risk enterprise. Now, if you’re Amazon Prime Studios, of course, you can leverage that with the rest of the business, and there are synergies and so forth. But if you look at Netflix, I mean, they spent billions of dollars, they’ve created a lot of good content. But it’s an iffy proposition. What if it doesn’t pan out? And this battle that the big streamers are undertaking to really establish their foot and this jockeying for position, it could turn into a bloody battle, and there could be victims of it.
Ryssdal: What does that mean, then for the consumer?
Cabral: For the time being, I think it’s great. I honestly think that the amount and the quality of content that’s been produced in the past decade, it’s unparalleled in history. And this is not about what economists refer to as ‘the recency effect’ that we sometimes have a tendency to put more weight on recent events. No, I actually think this is objective — with the exception of access to streaming, which is a little chaotic right now. So qualifying that, if you’re willing to have, say, six or seven subscriptions going on if you’re willing to spend 100 bucks a month, right? It’s the greatest time in history to be watching content.
Ryssdal: Right. The catch, of course, is there are two catches. First of all, every time I sit down and I turn on Netflix, and I flip through, there’s nothing I really want to watch. So that’s a challenge. But you know, everybody’s got their own tastes, I suppose. But number two, not everybody can afford six or seven subscriptions a month, right?
Cabral: Yeah, that is exactly what I was mentioning. And there’s a lot of money being left on the table in other ways. There are a lot of situations when people would be willing to pay five bucks for a movie, right? And they’re not paying that because the way the system is organized right now, it does not allow the seller to allow this person to pay five bucks for a particular movie. And that’s why I’m saying that this is really asking for some reorganization to the way the consumer has access to the stream.
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