On the verge: Are the rising costs of video streaming outweighing the benefits?

By Shirish Nadkarni

The video streaming industry is booming like never before. Society is currently undergoing a revolutionary change in the way companies make and distribute content, as well as the way that consumers view that content. Indeed, streaming has become fully embedded into many people’s lives due to the growth of devices and services; and it has come to affect our lives — work, families and even our pastimes.

According to a report by the Motion Picture Association of America, the US had nearly 340 million video streaming service subscriptions by end-2024, which is actually more than the country’s population. This is due to the increased popularity of streaming services and the shift away from pay-TV. 

The situation is identical in the Asia Pacific (APAC) region. As at end-2024, APAC is estimated to have had 642 million video service subscriptions, also known as subscription video-on-demand (SVoD). China (391 million) had the most SVoD subscriptions in the region, followed by India (150.6 million) and Japan (52 million).

The digitisation of media and the growth of broadband internet has transformed the streaming video industry, and the SVoD industry in particular. From its roots in user-uploaded short videos at the dawn of the new century to the current ubiquity of full-length movies and shows on screens of all sizes, the industry has witnessed unprecedented growth that continues unabated. 

It is therefore important to evaluate the costs versus benefits of the burgeoning video streaming industry with regard to consumers, multichannel video programming distributors (MVPDs), and all other companies competing for market space. 

As a result of the growing video streaming industry, MVPDs – a term that includes cable operators, multichannel-multipoint distribution services, satellite services, and satellite programming distributors that provide television channels for purchase – have been in steady decline.

Although the decline in traditional television is no surprise, as it has been happening over the past years, the rate of the decline has been quicker than many suspected it would be. For years, it was believed that live sports would maintain the life of MVPDs and allow them to compete with streaming services. That is until, however, streaming services made live sports accessible to viewers at a lower price.

The rise of video streaming and over-the-top (OTT) services comes with several benefits and costs. The major benefits are the accessibility, flexibility, variety, and ability to reach niche audiences. On the flip side, the major costs are escalating subscription costs, the required high-speed internet, negative social implications, the impact on MVPDs, and over saturation of services in the marketplace.

Legacy media companies, including Disney, Warner Bros. Discovery, Paramount Global and Comcast initially entered the streaming market behind category leader Netflix with the objective of gaining subscribers, but are now searching for a return on their investments.

Their strategies include cheaper, ad-supported models, platform bundles and a crackdown on password sharing, though price hikes have shown more immediate results toward profitability. It means consumers are facing higher subscription costs with increasingly frequent price hikes.

“The years of prioritising user growth with low prices are over,” said Mike Proulx, Vice-President & Research Director at market research company, Forrester. “When Disney reported a revenue increase in its most recent quarter (October to December 2024), it was primarily driven by higher subscription prices, since user growth and ad revenue alone will not sustain profitability.”

That puts the burden of revenue growth somewhat on consumers’ shoulders, and users are feeling the strain. In a survey of 3,000 consumers, 90% agreed that streaming video subscriptions are raising their prices more often than they were in the past, according to Hub Entertainment Research.

“Meanwhile, companies are pushing consumers toward ad-supported tiers — which are often cheaper than commercial-free streaming — in a bid to attract more advertisers,” Proulx added. “And many of those consumers are taking the option. Media companies have found that advertising has grown for streaming.”

Disney CEO Bob Iger said that Disney had “earned” its pricing in the marketplace due to the company’s creative contributions and product improvements. He noted that with past price increases, the company has not seen a “significant” number of customer departures.

“When we look across our portfolio, we’re seeing growth in consumption and the popularity of our offerings, which gives us the pricing leverage that we believe we have,” Iger said. “Frankly, the advertising tier is appealing because we can make as much off ad revenues as we make off the subscription fee on the ad tier.”

“A couple of years ago, we took a unique approach to launching our ad tier (in December 2022), giving existing subscribers the option to either pay an additional $3 per month or accept ads.

“Nearly 95% of Disney+ premium plan subscribers paid to maintain ad-free streaming.”

Generally, price-pinched streaming consumers are willing to tolerate ads in order to pay lower subscription fees, according to Forrester’s research. Still, ad tiers are not immune to price increases. For example, Disney+ has periodically raised prices of its ad-supported plan.

“Until there is a mass exodus of users, Disney and others will continue to increase prices,” Proulx said. “However, the total cost of streaming can sometimes exceed that of cable for certain consumers because the content they’re consuming is broken up across the different platforms.”

There is one key factor working to streamers’ advantage. Across platforms, users are not often willing to sacrifice their desired content even when costs go up. Companies including Disney, Paramount and Warner Bros Discovery have turned to bundling their services into a single discounted offering. In cases where streaming is no longer cheaper than traditional television, bundles allow consumers to save money while accessing TV content across different services, according to Proulx.

Nonetheless, as consumers continue to face rising subscription costs, a broader streaming competition has come into being. While low subscription prices initially helped other streamers grow subscribers, they clearly cannot afford to keep doing that. 

“The amount that people have been able to pay for, the volume of content they get up until now, is just an absurdly good deal, but I don’t think it’s sustainable”, Proulx added.

In 2024, streamers began charging more for premium content, fought churn with longer subscriptions, and satisfied bargain hunters with more pricing tiers.

Most well-known streaming services have two subscription tiers – an expensive premium subscription without ads, and an ad-supported version that costs viewers much less. But there are more ways streaming services can appeal to viewers, based on their desire for premium content or, conversely, a cheaper, bare-bones service.

These advantages and disadvantages can help form predictions on what the future of video streaming looks like. There are several factors to look out for in the coming years during the evolution of the media landscape. 

First, as MVPDs continue to be in decline, consolidation may become more prominent. One example is the acquisition of 21st Century Fox by Disney. More companies may start consolidating in order to grow in size, power, revenue, and to prolong the survival of MVPDs against OTT services. 

Additionally, the phenomenon of cord-cutters and cord-nevers is likely to increase. Research indicates that the number of pay-TV subscribers is falling as the number of streaming subscribers is increasing. Streaming through MVPDs will likely grow in popularity due to the appeal to customers and content providers. 

Also, as people get rid of their pay-TV subscriptions, the content industry will see much more of the reconceptualised video bundle. It is likely that the norm will be having multiple streaming services at once, replacing the once-popular video bundle. 

The growth of OTT will probably have effects on the workforce as well. With the recent growth and demand for streaming services, there will be more jobs for people who want to work in the streaming industry. 

However, there will be heightened competition between the companies since consumers have many choices when it comes to streaming. Content providers must now compete for attention and money if they want to survive in the industry. Aside from increased competition, consumers may see a steep hike in subscription prices. Netflix has already raised its rate for its subscribers, and other services will probably follow.

Customers are willing to pay more for streaming, especially since the individual services cost considerably less than traditional pay-TV packages, so companies will likely capitalise on this high demand. Additionally, streaming services are incurring more costs through producing new content, employing workers, and maintaining the quality of streams, so companies will need to increase their rates to keep up with the costs.

Another prediction is the growth of original content. More and more streaming platforms are producing original shows and movies, which allow them to differentiate themselves from their competitors. Consumers often enjoy original content since it brings variety and high-quality options. 

It is clear that consumers now have more choices than ever. Just as the last generation saw the rise of cable, society is in a current wave of streaming. There is ambiguity as to what will come for consumers and media companies in the future, but as a result of OTT, the world of video and streaming will never be the same as it was just a few years ago. The future of streaming will ultimately evolve along with changing technologies and the reactions of consumers.