In a major turn of events, media and entertainment conglomerates like Netflix (NFLX), Disney (DIS), and their ever-expanding list of competitors are adapting to an environment in which exponential subscriber growth is a thing of the past.
It seems the majority of potential customers are already hooked to one or more streaming platforms and, therefore, companies are finding fewer untapped audiences to onboard. As a result, those companies are now shifting gears toward optimizing their existing business models. And with this shift comes a new focus: profitability.
Profit Takes the Spotlight
Profitability is practically a buzzword in media today, and it’s particularly emphasized throughout the streaming segment. For a seemingly omnipresent industry, it may come as a surprise that streaming services have historically operated on significant losses. Until now, they’ve bolstered investor confidence through subscriber growth. But as growth slows, streamers are now changing their focus.
This shift was highlighted by recent announcements from Warner Bros Discovery (WBD) and Netflix, both of which reported profits from their US direct-to-consumer streaming services. Even Disney, which regularly loses hundreds of millions each quarter from running Disney+, narrowed losses by 26% in the first quarter.
These announcements signal a turning point for an industry that’s been notoriously expensive to operate. Streaming platforms, initially seen as costly ventures, are starting to prove their worth, and media companies are keen to ensure this trend continues.
For consumers, this shift in strategy could actually lead to a lower volume of new streaming content, as platforms roll back expenses. However, industry experts are already speculating on what’s next for these companies, and the consensus points to expansion into another form of content: gaming.
As streaming services look for new ways to engage existing users and generate additional revenue, gaming could prove a potent new frontier, especially given the fact gaming has largely transitioned from physical to digital media.
In pursuit of profitability, media companies may soon invest in developing video game streaming, partnering with names like Activision (ATVI), Electronic Arts (EA), and Epic Games in the same way streaming platforms have joined forces and consolidated in recent years. As the focus shifts from quantity to quality, no one stands to benefit quite like viewers — or, perhaps, gamers.
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