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Streaming video is getting pretty pricey. Excluding free trials, teaser rates, and ad-supported

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viewing, Paramount Plus, Peacock, and Prime Video are $12, Disney Plus is $14, Netflix is $15.50,

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and Hulu is $18 every month. That doesn't sound like much if you're only using one service,

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but according to public polling, most of you have around three streaming subscriptions,

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2.8 to be exact. If you're in the very reasonable position of wanting to watch

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the Handmaid's Tales, Star Trek Discovery, and Reacher, assuming you're not sailing the open

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seas, Iron Maid, you're looking at a monthly bill of $42. But not to worry, because streaming

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services have the answer. Bundles. Amazon bundles Prime Video with its Amazon Prime membership,

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which obviously includes free expedited shipping. HBO Max is now available through YouTube as

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one of its premium channels, and in Canada, TELUS is offering a phone plan that comes with

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Netflix, Disney Plus, and Prime Video for an additional, wait a second, hold on, this is just

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cable, this is exactly what happened with cable, what? Okay, let me explain. When Netflix became

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the first paid-on-demand video streaming service in 2007, the market for at-home films and TV series

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was fundamentally different. The typical cable customer was paying at least $60 a month for

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118 channels, only 13% of which they even watched. Not only that, but it was getting more and more

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expensive. Between 1996 and 2008, the price of cable in the US rose at roughly double the rate

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of inflation. And if you wanted to watch an older show, your options were to hope for a rerun or

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wait for a physical release that might never come. Now, cable is expensive for a few reasons,

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including infrastructure maintenance and lack of competition among cable companies,

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but another contributing factor is upstream consolidation. In the 1990s, the number of

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cable channels ballooned, and large content providers like Disney, NBC, and Viacom bought up

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and merged with competitors. Cable bundles began in part as a way to simplify sale and

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distribution of large numbers of channels. Selling channels individually would have been

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prohibitively expensive, and a logistical nightmare due to cable's technological limitations.

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Not only that, but bundles also had the advantage of increasing the perceived value of the deal

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in the eyes of customers. It's like a fast food restaurant that only sells combo meals

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instead of single items. Separately, that $8 burger, $4 fries, and $2 soda would cost $14,

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but together, there may be only like 12 bucks. That might be a good deal from your perspective,

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but it's also a good deal for the restaurant, because it means that you have to buy all three

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instead of just the burger. But once the market consolidated into an oligopoly,

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those few major content providers had the power to push cable distributors

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to carry their rapidly growing stable of low and mid-quality channels alongside their Class A

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certified bangers. That consolidation also removed consumers' ability to shop around for a cheaper

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deal. Thus, our burger combo gets more and more questionable sides until the meal deal costs

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over $50, even though you still only want to eat $12 of it. Part of Netflix's ability to disrupt

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that calcified market was technological. It could provide users with a large library of

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on-demand titles without having to worry about recording inconveniently timed broadcasts or

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paying steep late fees on forgotten DVD rentals. But another major factor was simply the price.

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In 2008, an unlimited monthly subscription to Netflix cost only $9, less than renting

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three recent releases from Blockbuster at the time. Netflix didn't have everything on its

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platform, but streaming was simple, convenient, and relatively cheap. So why didn't it stay that way?

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The problem with Netflix's business model was that, much like cable, once it was obvious how

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profitable it was going to be, everyone wanted in on it, and nobody was willing to keep selling

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their streaming rights for bargain basement prices. As rival streaming services proliferated,

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they competed for and bid up the price of popular content, which was still mostly coming from the

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same heavily consolidated market that pushed up the cost of cable. In fact, those same content

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providers were often the best positioned to launch their own rival streaming platforms.

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Paramount Global, nay Viacom, has Paramount Plus, NBC has Peacock, Warner Bros has HBO Max and

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Discovery, and Disney owns Disney Plus, Hulu, and ESPN Plus. These companies then make the obvious

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choice of treating their own content as exclusives. In a crowded field of competitors, it becomes more

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and more difficult to stand out. Early services like Netflix and Hulu can no longer compete based

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on technological superiority, so instead they need to differentiate in terms of programming.

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Streaming services without their own production ARM start spending the bulk of their money on

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licensing a few hot properties while the rest of their libraries slowly dwindle. In 2014,

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Netflix US had over 6,000 streaming titles. They now have fewer than 4,000. Plus, a lot of

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cheaply licensed shows on these services are clearly just there to give the illusion of bountiful

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options, not because they're a real draw to viewers.

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It becomes difficult, if not impossible, for the average viewer to find a single service that

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offers all or even most of their favorite shows. WAN Show might even wind up with several seasons

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split across two services. How this happens is that one service will pick up the first few

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seasons of a show on an exclusive contract in order to test how it performs. If it does poorly,

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they won't license the later seasons. Then maybe another service picks up the rest and the show

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gets popular. This drives traffic over to the first site, which might decide to renew their

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existing license, locking the absurd split in place for the next several years. I just want to watch

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the show. But in order to compete with other companies on exclusives, streaming services

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create their own in-house production studios. And while it's relatively cheap to simply

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license and stream already popular content, original content comes with a fair amount of

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both overhead and risk. This is a big part of the incentive behind Netflix cancelling so many

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promising shows after a single season, before they really have time to find their audience.

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These shows are so expensive that if they don't succeed immediately at pulling in new viewers,

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the company just bails. Though, to be clear, this is not the primary reason why Netflix now

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costs $1550. A significant proportion of the increase can be chalked up to simple inflation.

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Assuming an average rate of 2.43% inflation between when Netflix launched at $9 a month in 2007

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and now in early 2024, that $9 equals around $13.33 in real terms, leaving us with an actual

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increase of only $217. Higher licensing costs and higher overhead make it harder to compete on price.

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But there's no point in being cheap if it means you won't have anything left to draw in customers.

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Worse, there's essentially a finite number of potential customers willing to pay for any

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streaming service. Never mind yours specifically. The average person in the US is already subscribed

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to multiple services and around half of us are paying for at least one we don't regularly use.

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As the content becomes more fractured, so does its audience. As the audience becomes more fractured,

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the margin on these expensive exclusives becomes narrower and narrower as each subscriber

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supports a proportionally larger fraction of the production costs.

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Now if you, as a company, can't cut costs, you can still increase the perceived value of your

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product. You can still bundle. You can bundle together multiple streaming services. You can

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bundle with your own parent companies, other products. You can bundle with other unrelated

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services. You can even bundle with cable. What? You can, like HBO Max, bundle with YouTube to at

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least decrease the slight friction that comes with switching over to a different app. At least then,

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even if every individual service is given at a discount, the customer pays more overall.

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This expensive, vulcanized system has, perhaps understandably, pushed more and more viewers

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towards piracy. Which is why the current fight between streaming services and cable is over

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time-sensitive content like live events, especially sports. Passionate sports fans who want to watch

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their teams' games in real time not only need to have cable, but usually at least two or three

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different streaming subscriptions. For example, NFL games are typically streamed live on Paramount

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Plus, which carries local CBS stations. However, in the fall of 2022, two games for the Tennessee

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Titans were exclusive to Prime Video outside the Nashville Broadcasting Area. Not only that,

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but the Titan September match against the Buffalo Bills was only available on Monday Night Football,

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which is exclusive to ESPN. Now I'm just going to come home from work and be mad still. I just

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want to tackle somebody. This clearly isn't the best possible deal for viewers, but it's the

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natural extension of a clear set of incentives. Cord cutting can't be cheap for the same reason

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that cable couldn't be cheap, because the shows you want to watch are expensive to produce,

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and the heavily consolidated industry that makes them wants you to pay for the whole bundle.

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But we're not going to make you pay to bundle this video with another one from TechWiki.

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Check them all out. After you liked the video, if you liked it, disliked it, if you disliked it,

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check out our other videos. I already said that. Comment below with video suggestions, and don't forget to subscribe and follow. Okay, now you can bundle up. It's cold out there.