Why Streaming Subscription Prices Will Continue to Rise

You are a user—so get ready to be used

I got a request to explain why streaming subscription prices are so damned high—and getting higher.

This came in response to a chart I shared two days ago:

Source

And it’s not just Disney.

All the streaming platforms are jacking up prices. I still subscribe to five different streaming services—down from six previously. Every one of them raised prices this year, and always by more than the inflation rate.

Here’s what Spotify is doing:

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What’s going on? And will it continue?

I recently described this as an “endgame strategy”—but that might be confusing to readers.

A chess endgame from the 15th century (Source)

Endgame is a term drawn from chess, where it refers to a body of wisdom about the final moves on the board. But business is like chess, so I frequently analyzed endgame situations back in my days at the Boston Consulting Group and McKinsey.

I now see these endgame strategies getting implemented in various media, entertainment, and streaming businesses. But almost nobody inside those businesses wants to talk about it.

So let me lay it out for you.

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The Entertainment Industry Is Adopting an Endgame Mindset

You pursue an "endgame" strategy when demand for your business hits a wall, and it's hard to attract new customers. The most typical endgame strategy is to cut back investment into new products and services, while raising prices sharply.

You're willing to accept some loss of customers, because you’re now squeezing more profit-per-user out of your remaining consumers—who stick with you out of loyalty or habit or inertia.

These are your sheep, ready to be shorn.

Profit per customer is now the key metric driving your business. It’s more important than innovation or growth or artistry or any of those old fashioned ideas.

That’s why, for example, Netflix won’t share data on the number of subscribers anymore. They claim this is no longer relevant to their business model—and they aren’t lying.

Price increases are now the engine of their business.

It seems like a paradox—how can price rise while value falls? But this is exactly how the endgame strategy is played.

That’s precisely how you grow profits when you can no longer grow your user base. This is how execs get rich in a stagnant business. They can still make buckets of money while their customer base shrinks.

This is already happening in the newspaper business, private colleges, some healthcare sectors, and other stagnant industries. Private equity firms are experts at implementing this strategy—so be prepared when they arrive at your workplace.

This is now starting to happen in entertainment and media. All the major players are cutting back investment in new stuff.

• The number of new scripted TV series fell by 23% last year, and will be ugly this year too.

• Record labels now keep pushing old songs instead of developing new artists—and put most of their investment dollars into the rights to tunes from the distant past.

• Film studios are “are releasing a smaller number of titles for a shrinking revenue pie”—in fact, everything related to traditional filmmaking is getting smaller and smaller.

• Newspapers were the first to do this in publishing—shrinking page count while raising prices. But the rest of the legacy publishing business is now embracing the same endgame strategy.

This is the new normal. You will pay more for less.

And there’s not much you can do about it—except walk away from these platforms. They expect a few of you will do just that, but more will stay. These remaining loyalists will get punished for their loyalty.

That’s the new streaming business model in a nutshell.

But don't expect Disney, Netflix, Spotify, or anyone else to announce it in a press release. Watch what they do, not what they say.

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Here’s a tiny glimmer of good news. As legacy businesses enter this endgame phase, opportunities emerge for indie operators and freelancers. Creativity won’t disappear—it will just change its location.

If you work in entertainment or media, you can still thrive. Endgame for some will be the beginning for many others.