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The New Era in Streaming: Everything New is Old Again
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The New Era in Streaming: Everything New is Old Again

I have seen the future and it doesn’t work.

Frank Palotta at CNN Business recently published an article on the current hand-wringing state of the streaming business:  “The Streaming Wars Are Over.”    Palotta quotes media analyst Michael Nathanson:  “…subscriber growth has come to a halt.  You’re fighting a war in a land that has no more resources in it.”

Services like Netflix have been losing subscribers as well as big bucks, although paradoxically not always at the same time.  Disney+, for example, added 14.4 million subs in the third quarter…yet lost over $1 billion on its streaming service (we’ll get to how that’s possible).

From Douglas A. McIntyre at 24/7 Wall Street:  “As Walt Disney Co….released its earnings, one thing that became clear is that its streaming subscriber base will not grow as fast as it did in the past.  However, the numbers showed it likely has as many subscribers as Netflix Inc…Disney still loses money on these products.  Netflix is in growth trouble, and this, along with high production prices, has eroded its bottom line.”

If you love your streaming, don’t sweat; according to Palotta, the popularity of streaming means it’s here to stay.  But the very things that make viewers happy about streaming are the same things that are giving streaming services belly-burning agita.  An interesting aspect to all this is that every one of the problems streaming services are wrestling with were not only predictable but inevitable.  The challenge for them going forward is the same challenge every media platform and programming service that has rolled out over the last fifty years has faced:  how to keep subs happy without going broke.

streaming services


Generals call it “Victory Disease”.  The ancient Greeks called it hubris.  It’s that feeling based on early victories that your decision-making is impeccable, that you are immune to that which brings down others because…well, only because you believe you (and your army, your business, your whatever) are different.

Since the beginning of the modern cable TV era in the 1970s, every new media delivery platform and/or programming service that has come along since then has ridden in on a great, rising wave of hype, novelty, consumer hunger for something different, and unreasonable consumer expectations (our joke at HBO over the disparity between what people paid for the service and expected from it used to be people pay for a Ford Pinto – look it up – and then bitch when it doesn’t ride like a Cadillac).  That early success could run for years, fueling the impression inside an organization that it could run forever…until the next thing came along.  By that time, the novelty had worn off, it was clear to consumers the product hadn’t lived up to the hype, and there was still – and always will be — that hunger for something different/else/better.  The early days are always a Gold Rush…and then sometimes a collapse, sometimes just a slow ebbing.  In any case, it’s the oldest law of physics:  what goes up must come down.

When cable system began springing up in the 1970s, the promise was the viewer would no longer be restricted to the few stations in their market area.  More choice?  Well, yes and no because, in the 1970s, more choice just meant more channels filled with old TV shows and old movies – the same stuff you’d been watching on your local channels for years.  

But then along came pay-TV channels like HBO and Showtime!  Hey, you can have a movie theater in your living room!  No more having to get a babysitter, pay for parking, all those night-out logistical headaches just to go to a theater filled with rude people and soda-sticky floors.  But then people who maybe went to the movies ten times a year were getting that many movies and more (in the early years of the service, fifteen was typical) in a single month, and that kind of exposure reminded them of why they’d stopped going to the movies in the first place; because most of them in their view, in one fashion or another, kind of sucked.  They were for teens, they were too gory, too violent, too vulgar, too stupid…or just plain bad.  Bad movies were bad enough; being subjected to each of them a dozen times a month, sometimes more than once in a day, just made the bad badder.  And then those same clunkers were back on the service being run to death again in a couple of months…and then again…and then — .  Well, you get the picture.

Streaming vs video store rentals

Ahhh, but then comes home video in the 1980s!  This is great!  You just pop down to the video store, and only rent the movies you want when you want them.  No more plowing through teen sex comedies and movies about serial killers using every farm implement in the tool shed to do away with the teens who weren’t in sex comedies just to get to one or two good flicks.  No more being a servant to the programmer’s scheduling.  Better still:  the video store was getting those good flicks months before HBO did.  Does life get any better than this?  But then you had to deal with returns and late fees and rewind fees, but the worst was realizing that if you wanted a good movie for the weekend if you didn’t hustle your ass to the video store on your way home from work on Friday, you’d be dealing with what the video store biz called “depth of copy” issues.  That’s trade talk for how many copies the video store wants to spring for of a specific title before they figure each copy won’t do enough rental “turns” to make it worthwhile.  Show up a little late on Friday, the good stuff is gone and you’re going up and down the aisles passing movies you never heard of, low-budget junk, and – again – those same oldies you’d been watching on local TV since you were a kid:

“I thought you were going to get Top Gun!”

“They were out.”

“What’d you get?”

“This was on the ‘New’ shelf:  Chud II.”

“Pack your things.  You’re staying in a motel tonight.”

In the 1990s, along comes direct satellite delivery.  Why are you paying for all these cable channels you don’t watch?  Those thieves running the cable system put together tiers that have the one damned channel you want tied to a bunch you don’t.  The satellite service providers tell you that now you can subscribe only to those channels you want.  Screw the rest!  But it becomes a hassle dealing with all those different channels, you find yourself running up a tab with each service, and combined you find yourself paying more for less than you were with cable!  Then some entrepreneurial sorts say, Tell ya what:  to save you the headache, we’re offering bundles of cable channels – one bill, one discounted rate.  And then there you are, paying for a package that looks an awful lot like what you were getting on cable.

Giddy opening days, followed by a creeping sense of disappointment and frustration, and then a plateau if not a slide; it’s practically a ritual.  Like I said:  it’s physics:  what goes up etc.

But the streamers thought it would never happen to them, believed with all their happy little hearts that what goes up could stay up there forever.  Tell it to Sir Isaac Newton.


HBO streaming service

It’s an interesting study, looking at how streaming services, despite all the thinking by both the streamers and their subscribers that this streaming thing was that treasured “something different,” have conducted themselves in a way that parallels the history of cable and pay-TV; you know — the things streaming is supposed to replace.  But if streamers did a lot of the same things their predecessors did, it was for the same very understandable reasons.

Take pricing.

In the 1970s, the way a town got cable service was an operator would apply to the town for the exclusive franchise for that municipality.  The franchise agreement would specify the territory to be covered and also – here was the rub – basic service rates.  In their applications, it was not uncommon for cable systems to underbid to beat out competitors and gain a franchise.  One of the reasons pay-TV services like HBO and Showtime cost so much more than basic in those days was the markup system operators threw on those channels, sometimes as much as 100%, to make up for the bleeding the operator was experiencing through its underpriced basic service offerings.

In 1984, cable was deregulated and predictably prices jumped.  To the consumer, it was a bit of a shock.  I’m not saying greed wasn’t a part of the hikes (ok, I’m a cynic; a big part), but the operators were also trying to get rates up to something they felt was fair market value.

And that’s sort of the fix Netflix, and Disney+ and the other guys have gotten themselves into.  They offered a lot for a little.  According to Pallotta, “Streaming trained millions of viewers around the world to expect a lot of ad-free content for an inexpensive price.  But that expectation was unsustainable…”  Pallotta again turns to Michael Nathanson:  “Wall Street just paid people for subscribers, and because it paid people for subscribers, companies did not care about the economics.  They were willing to do whatever they could to chase subscribers.”  Translation:  they deliberately underpriced themselves.

Streamers have been like street corner heroin dealers:  “Hey, kid, try this; the first hit is free.”  Now the user is hooked.  But it’s easier to walk away from a TV service than heroin, especially if the dealer starts bumping the price.

For the first fifteen years or so of the modern cable era – say from the early 1970s into the mid-to-late 1980s – growth for cable (and the pay-TV channels they carried) was fueled by the constant expansion of the cable universe.  But eventually, the market grew saturated and there was no place left to grow.  That’s where the streamers are now; Nathanson’s “…land that has no more resources in it.”

How high can content providers hike prices without turning off subs?  Especially after they’ve spent the last few years – as Pallotta puts it – “training” subscriber expectations.  How do you successfully navigate going from hyping subs on the idea of paying a little to get a lot to the message of paying more to get less than you used to?



Movieland Video Montreal

In those early cable years, the pay-TV business was driven by theatrical movies.  But by the late 1980s, home video had eroded the value of movies to services like HBO and Showtime.  In fact, the timeline of a movie in those days had pretty much beat a movie to death by the time it got to pay-TV:  theatrical release ran six months or so, followed by pay-per-view for a month, and then to home video.  By the time a movie got to pay-TV a year or so after its theatrical debut, it was hardly the mouth-watering offering it had been pre-VCR.

This was one of the big drivers behind pay-TV’s push into original programming, but as originals became a more prominent part of a pay service’s line-up, they became as much an exercise in branding as in offering subs something they couldn’t see anywhere else:  on TV, in movie theaters, at the video store.  What do I mean by this?  I can’t answer for other services, but I spent a couple of decades at HBO and know how the dynamic worked there.

By the mid-1990s, with shows like Dream On, Tales from the Crypt, The Larry Sanders Show and Oz under its belt, HBO felt it had found it original programming identity; discussions about potential programs revolved around the question, “Is it an HBO show?”  What did that mean?  Well, it’s like the old joke about art:  I don’t know much about art, but I know it when I see it.  Maybe I can better illustrate the idea by decisions about what wasn’t an HBO show.

At one point, the company created a production arm to make TV shows for commercial television, the idea being to gain some profit from a good idea that wasn’t a fit for HBO.  The biggest success that arm had was Everybody Loves Raymond.  The company felt the concept had great potential, but that it was still, despite its quality and the talent involved, configured like the standard network TV sitcom; it wasn’t going to work for HBO because HBO didn’t do that kind of thing.

And there was the case of Arli$$.  The hope going in was that the show would sort of be like a sports-oriented version of The Larry Sanders Show, but, in execution, it wasn’t.  Arli$$ regularly took a pounding by reviewers and there was a growing feeling in the company that, despite the fact that the show’s ratings were actually higher than Larry Sanders, it wasn’t “an HBO show.”  The only thing that kept the series on the air was star and creator Robert Wuhl stirring up the show’s fans to hit HBO with letters and calls to keep it on the air.

So the idea behind any offering being “an HBO show” was that the service’s originals would be a signature for the service:  that if you thought of the show – like, say The Sopranos – you would immediately think of HBO, and if you thought of HBO — .  Ok, you get it.  That’s branding; that’s making the company name stand for something; that the consumer identifies the brand with a product no other service offers.

Streaming services, with a cluttered competitive environment of over thirty streaming programmers, no doubt got around to thinking along those same lines.  Like HBO in the 1980s, they didn’t want to just be identified as a dumping ground for theatrical movies (most of which, as in any era, were, well, nothing you’d stand in line for) and plain ol’ TV shows with the only benefit of convenient viewing.  And that’s when you get an organization like Netflix throwing staggering amounts of money at original programming, starting in 2011.  According to a March 2022 story in Statista, Netflix’ spending on content went from $6.9 billion in 2016 to $17 billion – more than any other TV programmer including broadcast and basic cable networks, pay-TV services and other streamers — in just five years, with almost 40%+ of 2021’s content being originals.

The old linear model of pay-TV scheduling – programs airing on specific dates at specific times – could never match what streaming services provide in terms of sheer quantity.  But from an economically tactical point of view, it did have its advantages.

With HBO’s successes during the time of The Sopranos and Sex & the City, the service began to conceive of a doable, sustainable programming model.  The way I heard one exec explain it, the service always needed one or two heavyweight shows i.e. The Sopranos or, later, Game of Thrones (we were very much aware that having three heavyweights at the same time – The Sopranos, Sex & the City, and Six Feet Under – was tantamount to an alignment of the planets and was unlikely to happen again, our concern being subscribers might come to think of it as a norm…somewhat similar to streamers’ concerns about cutting back on programming).

Let’s think of those heavyweights as the A-list.  There was a B-list of shows that still generated buzz about the service but drew smaller audiences and were also cheaper to produce:  series like Curb Your Enthusiasm, The Wire, and Real Time with Bill Maher, or later, Girls.

And then there was another pool of programming:  one-off special events like big-name music concerts, boxing matches, HBO original movies and mini-series.

Typically, A-list shows produced ten episodes per season, with B-listers usually less, maybe six-eight eps.  So, the way this would play out over a year would be something like this…

Let’s say we kick off the year with The Sopranos.  One episode is aired per week.  It will run in multiple time slots during the week, but there will only ever be one episode premiering each week.  At the five-week mark, maybe there’s a break for a week while the first five eps are rerun, giving people who may have missed an episode or two a chance to catch up.  Then the back five are run.  After the premiere of the last episode, maybe another week is dedicated to re-running the entire season.  After that twelve-week run, Sex & the City is brought on and aired the same way, and then Six Feet Under.  Perhaps extra time is taken between series and given over to some of those one-off special presentations, or a few weeks are dedicated to a miniseries.

While these are all headline offerings, beneath them the B-list shows are being introduced and rotated in the same manner.

Bleeding shows on and off the service in this manner allowed the company to do two things:

Provide a steady diet of new exclusive offerings throughout the year.  Think of it as a diet that wouldn’t make you fat, but wouldn’t starve you either (as opposed to streaming which is like an all-you-can-eat buffet).

It also gave the program publicity area of the company breathing space to focus its muscle on a comparative (next to streaming) few titles at any given time, which, as original programming on the cable spectrum began to proliferate in the early 2000s, was critical to keeping individual titles and the company brand a stand-out in an increasingly cluttered environment.

And it was a hell of a lot cheaper (although not cheap – at that time, HBO was spending between $750 million and $1 billion on programming, about one-third of it going to originals i.e. series, original movies, mini-series, music and comedy events, sports) than what streamers need to do to stock their buffets.  They can’t bleed a small number of programs out month by month, airing them in weekly installments.  That’s not why people come to streamers.  Streaming services may not have created binge viewing, but they’ve certainly been gasoline thrown on that fire.

There’s another aspect in which streamers are victims of their own success.

Streaming services
Image: Mark Mctaggart via Pinterest


When HBO programming came up with a big-dollar item, something that went way above and beyond a typical series cost, like a miniseries (a single episode of Band of Brothers, for example, cost $12.5 million; by the end of the series, The Sopranos was costing $4-6 million per ep toward the end of its run), that was an expenditure that had to be approved by the CEO.  Jeff Bewkes was the top guy at the time.  The programming guys would explain why BOB would be good for the service, probable appeal, kind of press it would receive, possible awards.  Jeff would nod, Yeah, that’s nice, what about the cost?  After all, we do this, that means there’s less to do something else.  Then the programming guys would nod and say after we get our use out of it, this is what we project we’ll get in home video sales (HBO had its own video arm), and this is what we’ll get in sales overseas and to basic cable here.  On some shows, like Rome, there would even be overseas companies picking up part of the tab in exchange for exclusive rights in their home territories.

My point is there were these aftermarkets whose payouts made a big-dollar expense like Band of Brothers affordable, maybe even profitable.

But streaming has compressed home video and all television platforms into a single platform, and truncated – or in some cases, completely done away with – theatrical release.  To feed the bottomless appetite of their subscribers, streamers have to spend phenomenal amounts of money to insure there’s always something new for subs to see, but there’s little in the way of aftermarkets to try to recoup that money (i.e. Disney+ gaining millions of subs while bleeding money).

This also explains why so many popular streaming shows get cancelled abruptly.  And, again, there’s a precedent in old-fashioned cable.


When HBO rolled out Deadwood, the hope was this was the show that would fill the gap left by the departing The Sopranos.  

Well, not quite.  The show was critically acclaimed, made a lot of year-end Year’s Best lists, but ratings for Deadwood, as I remember, were about half that of The Sopranos.  In fact, as I remember, they were less than any one of the Big Three:  Sopranos, Sex & the City, Six Feet Under.  They were not awful, but the problem was Deadwood was a hell of an expensive show.  After all, the production company had to literally build the Old West town of Deadwood.  Costs ran about $4.5 million per ep.

While HBO used to brag that they weren’t like commercial TV, that ratings didn’t matter, well, there was a point at which they did which is when you’re spending that kind of money for a show not a lot of people are watching.

Here’s an example of the reverse:  The Wire.  Here was another critically-acclaimed, Top Ten-list maker, but the audience was actually fairly small.  But so were the budgets.  The calculation was all that press attention it brings to the services made it worth the moderate investment.

Streamers are in the Deadwood scenario, although not over any one particular show but over their programming strategy in general.  A Netflix’ or a Disney+’ entire original programming slate is one, giant Deadwood.  


Which leaves streamers in the lousy position of breaking lousy news to their subs.  Douglas McIntyre:  “The only way to make more money as the growth of their number of subscribers slows is to increase prices.  Disney+ will take its subscription fee up $3 to $10.99 in the United States in December.  Netflix has resorted to a similar strategy…Price increases among the existing streaming services may backfire.  What companies make on higher prices they could lose on cancellations.”  There’s also talk of, well, let’s call it a B-service – an ad-supported Netflix…that you would still have to pay for, but just less than the premium Netflix.  And, of course, there’s cutting back on new programming.

Michael Nathanson’s prediction is the next phase in the streaming competition is bundling:  “Services can get together to form new services or do what Disney is trying to do and bundle the heck out of two or three other services.  As we saw in pay TV, bundles work.”

Disney’s already done that with their $10.00 bundle of Disney+, Hulu, and ESPN+.  And this is what’s also happening with the HBO Max and Discovery+ merger which will roll out their combined service next summer.

So you wind up buying a couple of these bundles (McIntyre reports “Two-thirds of Americans have at least one paid TV service.  The average number of subscriptions per household is about four”) to get yourself a nice spread of programming, some of them are ad-supported so you can save yourself a few bucks…  Hey, wait a second!  Didn’t you already have this?

Well, sort of, yeah; it’s cable but with streaming instead of linear scheduling.  So the viewer may not quite be back where the viewer started fifty years ago…but it’s in the ballpark.

Written By

Bill Mesce, Jr.'s books include Overkill: The Rise and Fall of Thriller Cinema, the recently published The Wild Bunch: The American Classic That Changed Westerns Forever (McFarland), and The Screenwriter's Notebook: Reflections, Analyses, and Chalk Talk on the Craft and Business of Writing for the Movies (Serving House), as well as the novel Median Gray (Willow River Press) and Inside the Rise of HBO: A Personal History of the Company That Transformed Television.

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