Staying Current On Media Models: Digital Streaming’s Rise

Often feel like there’s nothing on T.V. or the radio? You’re not alone.

Cable subscriptions have been decreasing and are now projected to fall below 40 million households and cable/broadband bundle companies are having trouble retaining customers, much less signing up new customers. According to Nielsen statistics, household T.V. ownership is declining after years of increase.

Why, you ask? Cable and broadcast T.V. are increasingly losing their share of the market to streaming services such as Hulu, Netflix, Amazon, and Google Play. Additionally, HDMI plug-in services like Roku and Google’s Chromecast are becoming more popular and attracting new apps, both having sold millions of units.

Netflix, which posted only marginal profits last year, appears to be making headway after a
2,200% gain to $53 million this quarter and Hulu had over $1 billion in revenue last year alone. Netflix has also gained acclaim for its two new series (House of Cards and Orange Is The New Black) to hail from its studio venture. Meanwhile, in the music industry, Spotify gained its 10 millionth paid subscriber this year and Pandora earned its most revenue yet in its 2013 fiscal year.

The problem is, Pandora and Spotify are still losing money. An article in Bloomberg Businessweek cites a Generator Research report where the current business model for streaming music is described as “inherently unprofitable.” This criticism comes at a time when artists themselves are taking umbrage to the Spotify and Pandora model. The article mentions a folk artist, in particular, who “concluded that a song of his would have to be played 47,680 times on Spotify or 312,000 times on Pandora to bring in as much money as he’d get from a single album sale.” So, while consumers have more alternatives than ever before to an unlimited supply of free or affordable music, the streaming services as well as musicians are losing incentive to participate.

And while Hulu may have a billion in revenue, the joint venture between Disney and NBC
Universal hasn’t disclosed whether it’s profitable yet, despite having more than five million paid Hulu Plus subscribers in 2013. Hulu is also trying to develop its own shows, but has had limited success.

These hiccups in digital media aren’t signs that users no longer want this type of content, but rather that they’re growing increasingly savvy about an ever-diversifying media market. We’re still bullish on the internet as a medium for content, but companies that want to thrive online will have to offer innovative subscription plans or exclusive content to survive in today’s climate.