Is the Streaming Business All Grown Up?

We’ve been streaming for a while now. George W. Bush was still president when Spotify launched and Netflix started its transition to internet video, and Hulu came out a couple months before the beginning of the Great Recession. What followed was growth, then acceleration, then dominance. Netflix has nearly 280 million paid subscribers around the world. Spotify has 626 million users, 239 of which have premium subscriptions. Streaming won — it’s how people listen to music, and it’s what they mean when they say “TV.”

For streamers attached to big legacy media businesses, this is a mixed bag. Warner Bros. Discovery just hit 103 million paid streaming subscribers, mostly through Max, which is an impressive number in isolation. But the company lost billions of dollars getting there, and that’s only counting direct spending. In the same earnings report where the company touted crossing the 100 million subscriber threshold, it announced a $9 billion write-down in the value of its linear TV networks. At pre-merger Paramount, modest streaming growth led to a small profit eclipsed by a $6 billion write-down for the company’s cable networks.

For a pure streamer like Netflix, the story is simpler. The plan worked! Lots of people give you money and you’re not attached to a larger dying business. This is now the closest thing you have to a problem: Everyone knows about you, and most of your potential customers are already actual customers. Growth is slowing down, certainly compared to the early days, so you start nudging up prices, experimenting with ads, cracking down on password sharing, and, to get in front of the story a bit, start emphasizing revenue per user over raw subscription numbers. The prospect of topping out, or at least settling into slow growth, is tolerable for Netflix. For competitors with more baggage, it’s more worrying. Since 2019, with rising prices and general customer fatigue, churn rates among video streamers have tripled while new-user growth has slowed. Streaming as an industry still has room to grow, and linear TV still has a lot of dying to do. But it’s looking more likely that we’re getting close to a plateau. In music, where the line between streamers and the rest of the business is much clearer, labels are struggling with the same question, according to Bloomberg:

Streaming has exited a high-growth era and settled into a slower-growth era. Music companies are limited in their power to address the streaming slowdown on their own. So while labels believe this is just a temporary setback, they have cut staff and reorganized to juice their numbers in the short-term.

Record labels’ plan is, basically, to hope that streaming services somehow figure out how to grow again. “Apple and Amazon are more focused on other initiatives than innovating in music streaming,” Bloomberg notes, leaving Spotify, where the strategies on the table seem to be price increases, new subscription tiers of dubious value, and making its apps as annoying as possible to use for actually listening to music. For Spotify, again, these are responses to a good problem: They won! Everyone who wants Spotify has it. But, like Netflix’s post-victory strategies, they might be a sign of hard times ahead for everyone else, especially streaming services outside of the highest tier.

Charging more, cracking down on passwords, and subjecting users to advertising are relatively safe bets when you’re still growing, and a reasonable response to growth slowing down. Once you’ve hit the top — especially if you’ve started spending less on actual content for people to consume, as many streaming platforms have — they turn risky. It’s worth noting that the undisputed winners of the last two decades of media are yanking every lever they can to keep their numbers moving in the right direction. A plateau for Spotify and Netflix could look more like a downturn for everyone else.