Where is the streaming industry headed?

The streaming industry rn is similar to a liberal arts major – still trying to figure out what it wants to be when it grows up. And two recent moves by streamers speak to this point.

Ads are now the default on Amazon Prime Video. Moving forward, Prime Video members will always see commercials alongside a Reacher or Gen V binge – unless they shell out an additional $2.99/month for the ad-free version. Analysts expect Amazon to be rolling in a Scrooge McDuck pile of money due to the move, estimating that adding ads (lol) to Prime Video could generate $3.2 billion in advertising revenue per year, as well as $1.6 billion per year in additional subscription revenue from the ad-free upcharge ($4.8 billion total).

Warner Bros. Discovery is betting big on gaming. In a recent earnings call with investors, CEO David Zaslav revealed three things about the company’s gaming division: 1) it’s been profitable every year for the last 15 years; 2) it’s generated $400 million in operating revenue the past three years; and 3) it’s an area where WBD sees massive upside. Hogwarts Legacy, the best-selling videogame in the world last year, came out of WBD Games, and the streamer is also sitting on three other gaming IPs it values at $1+ billion: Game of Thrones, DC, and Mortal Kombat.

Big picture: Underpinning both of these moves is a focus on profitability. In 2023, streaming services not named Netflix lost a collective $5 billion, causing many streamers to put at the top of their New Year’s Resolutions: “reevaluate our strategy for 2024.”

Another key point the industry has to address: customer cancellations are rising. With these moves, Amazon and WBD are both wanting to have their cake and eat it too – aka trying to decrease customer churn while simultaneously increasing revenue.

• Amazon sees its Prime bundle, which combines various perks (like fast, free shipping) with its streaming offering, as a way to reduce the likelihood of cancellations because users have more than one reason to keep paying.
• Along the same lines, research indicates live games have a much lower churn rate when compared to streaming. WBD is looking to piggyback off this phenomenon to boost its streaming offering and reduce cancellations.

But whether it’s videogames or TV shows/movies, content is still king. According to a newly released Nielson report, Americans streamed 21 million years’ worth of video last year, a 21% increase over 2022. And this number is only expected to keep going up.