I've worked in television for over 30 years. Here's what you need to understand:
No major streamer except for Netflix is making money. They all continue to lose money, hundreds of millions, quarter after quarter. This is not a sustainable business model in any business. The losses have dropped since ad-supported tiers were introduced and it is hoped that these tiers will be the path to eventual profitability. One thing is clear: without these tiers, the streamers couldn't have survived.
So what happened? The reasoning behind the ad-free subscription streaming model was that Netflix would get to a billion subscribers, with the other major streamers getting into the mid to upper hundreds of millions. At that scale, the subscription ad-free model works. But then Netflix hit a wall at under 300 million subscribers and the alarm bells went off that the subscriber universe was going to be a whole lot smaller than anyone thought. And this happened while spending tens of billions of dollars each year on scripted shows, the majority of which almost no one was watching because that's what happens when you release more than 500 new shows to the public each year--who can possibly even know what's on? It would be a full time job just to track it all.
So... the lower-priced, ad-supported tier became a necessity for streamers to have a shot at remaining in business. And still some might not make it to profitability and survive, even with that extra revenue stream--we shall see. As for Apple: their bottom line for Apple TV+ must look terrible. I can't imagine how much they're losing per quarter. They likely have the smallest number of subscribers among the major streamers and, while they don't produce nearly as much content, a lot of what they do produce is incredibly expensive, especially in the sci-fi genre that plays a big role in Apple TV+ shows. Every episode of those series is at movie-level quality, and that costs tens of millions per episode to produce. Of course, for Apple, streaming is just a side business, and almost more like a marketing effort to further burnish and enhance Apple's high-quality brand. But still--it can't make sense even for Apple to continue sustaining huge losses in streaming, so an ad-supported tier would make sense.
Personally, I got hooked on ad-free streaming and I hope it can remain an option without getting ridiculously expensive. If you haven't noticed, the streamers are working hard to push people to their more profitable, ad-supported tiers by offering deals for them and not ad-free subscriptions. And, of course, there isn't a way to "DVR" streaming content and fast-forward through the ads--you're stuck with them playing through, which is a giant step backward from the DVR set-top box era.
It’s a shame they can’t cut the cinematic-level budgets and return to better writing instead of production values. As I always point out — Star Trek TNG and DS9 were low-budget affairs yet remain much more popular than any of the expensive “New Trek” and their glitzy 10-episode seasons of absurd lens flares and gloss. Why were they better? Because the writing was better, despite very basic sets. Better writing = better performances, better narratives arcs, better character development. Which matters more? All that, or sets & VFX?
It’s a choice.
All evidence points to media companies never getting Trek or the Sci-fi Audience in general, then blaming us for not putting up with the tricks that they pull to try and get our money.
Sure it seems to be media that could be made on the cheap with lowish budgets (Expanse and sets shakier than Melrose Place) and still draw a loyal audience of discerning buyers but the media companies are never happy with niche but happy viewers.
As for Apple: their bottom line for Apple TV+ must look terrible. I can't imagine how much they're losing per quarter. They likely have the smallest number of subscribers among the major streamers and, while they don't produce nearly as much content, a lot of what they do produce is incredibly expensive, especially in the sci-fi genre that plays a big role in Apple TV+ shows. Every episode of those series is at movie-level quality, and that costs tens of millions per episode to produce.
If they have 20m subs at $10/month, they have $2.4b of revenue per year. Some will go on service costs and some on content. If it costs $400m for the service, they have $2b for content if they make no profit. They made 50 shows in 2023. This is $40m per production. It says here Foundation series 1 was made for $45m:
Some of the movies have been $100-200m. Greyhound was $70m. If the average is $50-100m per production, they'd be down $0.5-3b per year with 20m subs. Apple made $383b revenue, $96b net income in 2023. $0.5b loss wouldn't be a huge issue and Apple TV pays for itself in marketing, $3b loss would need fixing.
They may have more than 20m subscribers. To break even on $100m per production, they need around 42m subscribers.
Using ads might boost numbers but I suspect it would be more likely to drive paying subs to the ad tier and ads degrade the experience so much. Youtube is barely usable these days with two unskippable ads on nearly every video plus unskippable ads in the middle and multiple views of the same ad, scam ads with deepfakes, medical scam ads, crypto ads, mobile game ads.
A lot of people moved away from cable because they pushed so many ads. Ad revenue is so low that it needs watching too many. It's something like 2c per view. This means to make up $10, you have to view 500 ads per month, 16 ads per day. Maybe 4 ads per show, 2 x 15s before it starts, 2 x 15s in the middle. Not terrible but this is what Youtube does now and it's not pleasant to use regularly. It feels like punishment being made to sit through ads. It would be better if they try for more quality shows before putting ads on.
Comments
Sure it seems to be media that could be made on the cheap with lowish budgets (Expanse and sets shakier than Melrose Place) and still draw a loyal audience of discerning buyers but the media companies are never happy with niche but happy viewers.
https://www.gamesradar.com/foundation-david-s-goyer-season-3-steps-down-showrunner-apple-tv-plus/
Some of the movies have been $100-200m. Greyhound was $70m. If the average is $50-100m per production, they'd be down $0.5-3b per year with 20m subs. Apple made $383b revenue, $96b net income in 2023. $0.5b loss wouldn't be a huge issue and Apple TV pays for itself in marketing, $3b loss would need fixing.
They may have more than 20m subscribers. To break even on $100m per production, they need around 42m subscribers.
Using ads might boost numbers but I suspect it would be more likely to drive paying subs to the ad tier and ads degrade the experience so much. Youtube is barely usable these days with two unskippable ads on nearly every video plus unskippable ads in the middle and multiple views of the same ad, scam ads with deepfakes, medical scam ads, crypto ads, mobile game ads.
A lot of people moved away from cable because they pushed so many ads. Ad revenue is so low that it needs watching too many. It's something like 2c per view. This means to make up $10, you have to view 500 ads per month, 16 ads per day. Maybe 4 ads per show, 2 x 15s before it starts, 2 x 15s in the middle. Not terrible but this is what Youtube does now and it's not pleasant to use regularly. It feels like punishment being made to sit through ads. It would be better if they try for more quality shows before putting ads on.