Streaming services battle price increases, password sharing and viewership

Judy Woodruff:

After years of free spending, the peak era of video streaming may be ending. Streaming services are adjusting their plans, including raising pricing and the addition of more advertising.

Content could be affected too. Exact numbers are hard to pin down, but Netflix alone reportedly spends more than $17 billion a year on content for its 220 million subscribers. Combined, streaming companies may spend more than $100 billion each year.

Geoff Bennett breaks down what it all could mean.

Geoff Bennett:

As streaming evolves, the industry is experiencing some growing pains. Netflix is hemorrhaging customers for the first time in a decade, the company says, and it expects to lose even more this year.

Netflix blames rampant password sharing, but there's also more competition and the company's decision to increase prices. And CNN+, the streaming service launched just three weeks ago, announced they're shutting down at the end of the month.

For more on the shakeup in the streaming world, we turn to Kim Masters editor at large for "The Hollywood Reporter."

After a decade of incredible growth, Netflix has reached what is likely its lowest point. It's lost subscribers for the first time in 10 years. The stock is getting pummeled. Why? What accounts for Netflix's stumble?

Kim Masters, Editor at Large, "The Hollywood Reporter": Well, the theory was, the sky's the limit, we can get to a billion subscribers at some point.

What happened is, the model just didn't deliver on that. They have raised prices. People complain that there's too much content, that it's not good enough, that they don't know how to find it. And they have spent and spent and spent. They have been very highly valued. They have been very gung-ho about throwing billions of dollars into content.

And for a while, it worked. But they have had a series of problems. They lost things like "Friends" and "The Office," which was part of the most popular content on Netflix, as their competitors all ramped up their own streaming services, Disney+ and HBO Max. And that has been another problem. They have competition now, competition that's taking back some of the programming that built them in the first place when they took it cheaply.

They got "Friends" and deals on old shows very cheaply. And then these guys looked at Netflix, said, hey, we better compete. And they took those things back. And they competed. And they're competing at lower prices.

Geoff Bennett:

Yes.

So, Netflix says it's now going to be open to offering lower-priced subscription tiers with advertising. For years, they'd said that they didn't want to have commercials on their service.

Kim Masters:

Right.

Geoff Bennett:

They're clamping down on password sharing. They're also going to invest more in gaming. Will any of that move the needle, do you think?

Kim Masters:

I think it's a very tricky path for them.

If you're — first of all, as you say, it was heresy that Netflix — they vowed, we will never advertise. And now they're basically saying uncle. But it's not something where you flip a switch, and suddenly you have an advertising service.

I mean, some of their competitors have spent years and years developing this. You need a staff. You need a team. You need to figure out how it works. And so that's thing one. And I wonder, to some degree, whether people who had gotten, say, very used to the Netflix model with no ads and churned out because of the price and then come back in will sort of go, oh, wait, these are just — there's too much ads now.

I mean, their ad load is going to be a big question for Netflix to tackle too. Password sharing also a little dicey. I mean, you have to go after the people who are paying money, who are used to this. So everything has a risk.

Geoff Bennett:

So what's this all mean for legacy studios that are going all in on streaming right now, especially for services like Disney+ or HBO Max that have a smaller subscriber base than Netflix does?

Kim Masters:

Well, in a way, the smaller base is a good thing, because they have room to grow. Netflix is the biggest with 200 million.

But Disney isn't there, and neither is HBO Max. So it's very ironic right now, because this is Wall Street-driven. Wall Street was all about streaming. You have got to do streaming. Streaming is the future. Everybody in Hollywood sort of pivoted and threw so much resources into streaming.

And now, all of a sudden, diversity is the new sexy. And the legacy studios, where people were like, oh, they have got this dying cable business, it's so terrible, the dying cable business still throws off a ton of money. So, all of a sudden, these guys that were sort of apologizing and saying, we're working on our streaming service, they're kind of like, don't we look good?

They're hurt by this, make no mistake, because their stock price was dragged down with the tremendous hit that the Netflix stock price took and the anxiety about Wall Street has pivoted. Now they're scared maybe streaming isn't the future. What is the ceiling for it?

So they're hurt too. They all have streamers. But they're going to — we have already heard David Zaslav, who just took over at what is now Warner Bros. Discovery, saying already before this happened, we will compete, but we're not going to kill ourselves.

Geoff Bennett:

So, a question about that.

I mean, how has that dynamic, all of the questions around streaming — add to that the pandemic — how does that change what gets green-lit? I'm curious about this question about how we watch. How has that transformed what we watch?

Kim Masters:

Well, one of the things that Netflix has done which is not pandemic-related is the binge model, where you get everything at once and you — you can stay up all night and watch it.

That's what they wanted. They said, we compete with sleep.

(LAUGHTER)

Kim Masters:

The other ones have been a little bit more cautious, like we're going to drop one or two, and then we will drop some more. They want that watercooler moment.

They want to have a big moment in an episode, and you talk about it maybe at the office the next day or on your Zoom call. And so that is a model again that Netflix has clung to that they may want to change. We will see.

But in terms of the pandemic, what we have is a quite a backlog and a glut of shows that were held up. So I think a lot of content creators, producers and their agents and representatives are very nervous that all of those nice commissions are not going to be so — rolling in quite so freely.

Geoff Bennett:

Kim Masters is editor at large for "The Hollywood Reporter."

Kim, thanks, as always, for your time. Good to see you.

Kim Masters:

Thank you.