Streaming services: meet the new boss, same as the old boss

Although it’s not entirely finalised quite yet, film studio Paramount’s tentatively approved merger with production company Skydance has sparked all sorts of conjecture. As that speculation swirls about what a successful merger might mean for consumers and the entertainment industry, the increased attention has also shed light on something else: the mercurial financial performance of streaming services.

Paramount+, in this instance, is the streaming service we’re talking about. Depending on who you ask, it has between 60 million and 80 million subscribers. That number is nothing to scoff at by any means, but the big news that’s come from the Paramount and Skydance merger discussion is that Paramount+ isn’t exactly setting the world on fire financially. In fact, it's losing money. It’s not alone, however. Recent streaming endeavours such as Disney+ and NBC’s Peacock, despite racking up ample subscribers, have struggled with the expenses that come with the territory of streaming, data storage and server costs.

This wasn’t the way the streaming revolution was supposed to unfold on several levels.

From the consumer’s perspective, there was a small window of a couple of years where it looked like streaming would finally allow many to cancel their cable TV subscriptions, increase their choices and possibly save money.

From a content producer’s perspective, streaming was supposed to level the playing field and expose content in a frictionless way to a global audience.

It’s easy to forget, but for many years, there was a loveless relationship between US consumers and their cable TV providers. Despite first bursting onto the scene in the 1980s under the idea of giving TV watchers more choices than the basic three network channels, that lofty promise was quickly clouded by rising prices, onerous contract details, and hundreds of channels that many never desired but were forced to pay for.

However, for all of cable TV’s flaws, and they were plentiful, it worked relatively well for many of the stakeholders.

It worked well for television producers who found a seemingly endless and lucrative home for their sitcoms, sold into syndication to cable channels who needed content.

It also worked well for cable companies, obviously, who enjoyed the low churn rate of consumers who didn’t have too many other options in terms of television, film or sports content.

For cable news companies, it also worked well. Regardless of ratings and advertising revenue, cable news channels could always rely on the carriage fees they could charge the cable operators.

The cable TV infrastructure was akin to the tower of Babel, and it made those at the centre of it wealthy.

Soon, however, high-speed internet and streaming came along. Cracks in the tower started to emerge, and methodically, the race to build a better content distribution model commenced. It’s a race that’s largely continuing.

Initially, both the cable model and streaming model seemed to co-exist side by side. Why? Those carriage fees proved to be a very lucrative firewall for content providers, so lucrative, in fact, that many cable networks were able to justify not putting their content on streaming services. Inevitably, however, as is the case with most technological advancements, the immediacy of streaming began to win out.

Some networks and cable channels started putting their content on services like Hulu and Netflix, and customers who were once beholden to cable TV packages started to jump ship in droves to those platforms.

Although they took years to turn into content powerhouses, Hulu and Netflix made streaming success look incredibly easy. As a result of those superficial views of both companies, the networks and content producers began to wonder why they weren't putting their own content on their own streaming services rather than outsourcing it to other platforms.

You even had boutique streaming services begin to pop up such as FilmStruck, founded in 2016, which was dedicated to showing rare, arthouse movies that otherwise would normally require a trip to a film festival or a deep dive at an obscure local library.

If you've never heard of FilmStruck, you're not alone, and therein lies a cautionary tale about streaming content, the rush to scale and corporate agendas.

FilmStruck, originally a creation of Turner Broadcasting, a division of Time Warner, was axed shortly after the merger of AT&T and Time Warner.

The reason for the service's demise, according to the newly formed Warner Bros Discovery network, was that FilmStruck was too niche, and would soon be part of the company's Max (formerly HBO) streaming service, therefore giving it more leverage.

"We plan to take key learnings from FilmStruck to help shape future business decisions in the direct-to-consumer space and redirect this investment back into our collective portfolios," read the Warner Bros Discovery news release.

While the shutting down of FilmStruck didn't make many waves outside cinema buffs at the time, it proved to be a canary-in-the-coalmine moment for who would ultimately win and control the future of streaming.

Several years after FilmStruck's shuttering, another former Turner entity, CNN, announced plans for its own streaming option, CNN+, in 2022.

Unlike FilmStruck, which at least had the luxury of lasting for approximately two years, CNN+ was shut down less than one month after its launch.

Similar to the fate that befell FilmStruck, CNN+, despite having more than 500 employees dedicated to its development, was shelved in part because it didn't fit into Warner Bros Discovery's plans for a bigger streaming service, Max.

Fast-forward to the here and now, and CNN does exist as a streaming service, but you need to subscribe to Max to get it.

You wouldn't be wrong in thinking that this all sounds very familiar, because it is.

While it might have served consumers relatively well, the a-la-carte vision of streaming services designed to appeal to our individual taste didn't provide a large enough customer base or large enough profit margin, to give the former kings of the content castle the leverage they once enjoyed under the cable-TV distribution model.

Some might point out that ultimately, the consolidation of all these streaming options could help prevent consumers from signing up to too many platforms, and sure, there's some accuracy in that, but that argument misses the point.

Part of the appeal of the initial streaming revolution was that we, the consumers, would be in control.

It turns out, that wasn't good for business. The current mentality is that scale in the form of a large userbase gives you leverage, a path to large profit margins, and potentially more appeal to advertisers.

With a forthcoming merger with Skydance, a movie production behemoth, Paramount+ gets more leverage.

Who does that leverage get applied to? We, the consumers who once thought we had control in the early days of streaming.