Will there ever be one dominant streaming service?

wrylachlan

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If they were losing money on streaming, they would shut down the service and lay off the people. That they're investing more in it tells you it's a lie.
Hmmm… either a very public CEO is lying to the SEC or my analysis is flawed. Which could it be?

There are numerous reasons to continue to invest in a currently unprofitable streaming service:
  • While the service itself is unprofitable the IP the service creates is profitable across its lifetime in other venues - sales to second run streamers, theme parks, toy licensing, video games, etc.
  • Continued investment can bring down the cost of production
  • Threshold effects - reaching critical mass of content will encourage a profitable number of households to subscribe
 

Ecmaster76

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Hmmm… either a very public CEO is lying to the SEC or my analysis is flawed. Which could it be?
Its definitely a thing. They have even been found in court to have done so relatively recently:

The Walt Disney Company lost a $270 million lawsuit in 2010 to Celador over accounting tricks used to mask profits on the Who Wants to Be a Millionaire (1999-07) licensed franchise in the United States: "ABC artificially deflated fees the network should have paid the production company BVT and Disney-owned Valleycrest, which in turn decreased Celador's share of revenue. Loss of merchandising revenue was also claimed."[30]

You may also recall the spat with Johansson over the Black Widow receipts. They managed to get that one swept under the rug through a settlement
 

LordDaMan

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If they were losing money on streaming, they would shut down the service and lay off the people. That they're investing more in it tells you it's a lie.
It just shows they think they can make money, not that they do.

Judging from the amount of flops in movies they have had recently, Disney's judgement isn't that great
 
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PhaseShifter

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"Stealing" viewers from Netflix seems like a secondary concern. Other streaming services just want you to bother subscribing to their service in the first place. Content producers want what they think is a reasonable payout for their content, which they've largely decided they won't get from Netflix (at least at some time horizon).

This is why I think it's going to be really hard to consolidate the streaming market, and also why I think ultimately people will end up paying more to get all the content they want (maybe not more than cable, but definitely more than the early days of streaming). The current pricing structure provides too much disincentive for content owners to all consolidate under one low monthly subscription.
This. From the streaming service's point of view, they're cutting out the middleman on their exclusive content.
From the consumer's point of view, the big streamers are creating an endless army of middlemen that all have to be negotiated with and paid independently.

The cable companies have themselves to blame. I think in the late '80s they briefly had a good model where you could augment basic cable with multiple packages focused on sports, movies, kids, or whatever, but now it's reduced to a three-tier system where to get more of the stuff you want, you have to pay for vastly more of the stuff you don't want. (I mean, I loved what I saw of the series Ash vs Evil Dead, but there was no way I was going to pay for an upgrade from Spectrum's silver tier to the gold tier just to watch one series.)

Now we've got a stupid model analogous to buying your burger from Whataburger, your fries from McDonald's, and your shake from Sonic when what we all really wanted was a model more like picking the toppings for your pizza when you place a delivery order.
 

wco81

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Netflix and Disney are trying to drive subscribers to ad-supported tiers by continually raising the ad-free prices.

What that does should increase churn.

Initially many more people may sign up for the cheaper ad tiers until the ad load per hour becomes intolerable, on top of the fact that they can't be skipped like you can with DVRs.

This new strategy seems likely to increase churn, though some like Max are offering some yearly discounts, like $199 a year for their most expensive tier instead of $20 a month.

They are also putting a $4 a month premium on 4K HDR streams and multiple streams (4 vs. 2).
 
If they were losing money on streaming, they would shut down the service and lay off the people. That they're investing more in it tells you it's a lie.
Part of it could be how they are doing the accounting. If the streaming division is paying the other divisions royalties/fees to stream the content, the streaming could be losing money while the other divisions make bank.
 
I just read that Disney is starting to warn parents that come Q1 2024, Disney and Hulu will merge and the new service will lose the "family friendly" nature of Disney+ and that parents will have to be aware that the new app will have all kinds of "adult" content that they will need to be aware of and learn to use parental controls for their kids.
 
Yeah, that's been in the news for the past week
Yeah...I just noticed it and thought it was kind of silly. I mean first of all...they had some pretty intense stuff on Disney+. Second, it just means that Disney+ will become like the rest of the world. Do they warn people that the Disney channel is on a TV that also has other adult stuff?
 

Shavano

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Yeah...I just noticed it and thought it was kind of silly. I mean first of all...they had some pretty intense stuff on Disney+. Second, it just means that Disney+ will become like the rest of the world. Do they warn people that the Disney channel is on a TV that also has other adult stuff?
It's about branding. Why cook the goose that lays the golden eggs?
 

wco81

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7% subscriber loss in October supposedly after the price increase was announced?

The report also contains figures from Antenna which seem to show that Apple TV Plus lost 7% of its subscribers in October, higher than the 5.7% industry average rate. Apple’s TV Plus subscription service can currently be bundled with other Apple services as part of the Apple One package, and it also comes free with Apple Music for students.


But they announced the price increase at the end of October, either the 25th or the 26th.

So unless there were a lot of cancellations in the last couple of days of October, the subscriber loss may not be all related to the price increase.

November and December may be more telling.

Maybe they put out some promotions too.

They essentially doubled the price in the past year, from $4.99 about a year ago to $6.99 and then $9.99 a little over a month ago.
 

wco81

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Netflix just released more viewing data on their streaming content than they have ever done previously.

Netflix today has revealed viewership data for 99% of its entire catalog, or about 18,000 titles around the world. It published the numbers in a report, What We Watched, capturing viewing from January to June of 2023. It is the first edition of a planned semi-annual look at viewership on the leading streaming service. The initiative is to document the highs, lows and in-betweens of the platform instead of delivering the customary lists of only the top-performing programming.

“This is a big step forward for Netflix and our industry,” the company wrote in a blog post. “We believe the viewing information in this report — combined with our weekly Top 10 and Most Popular lists — will give creators and our industry deeper insights into our audiences, and what resonates with them.”
https://deadline.com/2023/12/bridgerton-netflix-season-3-premiere-1235662929/

Hollywood guilds had long objected to the lack of transparency in streaming data, making the issue a key objective in this year’s dual strikes by the WGA and SAG-AFTRA. Netflix, which has volunteered significantly more information than any of its peers, has since last year published weekly Top-10 lists of viewership and its titles are also represented in Nielsen’s weekly streaming snapshots.

In the blog post, the company explained that it is including any title, original or licensed, that was watched for at least 50,000 hours in the six-month period.

“While this report is broader in scope, the trends reflected in it are very similar to those in the Top 10 lists,” the blog post noted.

There is a methodology change from the Top 10 lists, however. Data in the new report is expressed in terms of hours viewed, which is no longer the metric that Netflix uses to rank its own Top 10 and Most Popular lists. Since June, Netflix has reported “views,” which it calculates as hours viewed divided by runtime. Since then, both the WGA and SAG-AFTRA have adopted that calculation in regard to streaming transparency and performance bonuses in their latest contracts with the studios.

One of the biggest issues with measuring in hours viewed is that it favors content with a longer runtime, which generally are drama series. Films are at an even higher disadvantage. Much like “views,” reporting data in hours viewed also gives no insight into how many accounts completed a title, or even engaged with it past the first episode.
This is a value piece of data that all streamers, especially Netflix, use to determine the success of their content.

Part of the new agreements with the WGA and SAG-ATRA provides for more release of viewing data, to determine compensation for union members.

So Netflix plans to release this data regularly and we may get more detailed viewing data from other streamers as well.
 

Shavano

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7% subscriber loss in October supposedly after the price increase was announced?




But they announced the price increase at the end of October, either the 25th or the 26th.

So unless there were a lot of cancellations in the last couple of days of October, the subscriber loss may not be all related to the price increase.

November and December may be more telling.

Maybe they put out some promotions too.

They essentially doubled the price in the past year, from $4.99 about a year ago to $6.99 and then $9.99 a little over a month ago.
42% price increase and only a 7% loss of subscribers (if it keeps to that) would be a win. Not for you, but for Apple.
 

cateye

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I see Amazon will now put ads in our video streams unless we fork over an additional $2.99 a month.

This one in particular really galls me. It's not like they added a cheaper tier but with ads, as everyone else did, they just took value away from the existing tier. Semantics, sure, but the optics are so transparently shitty. At least boil me slowly, Amazon.
 

wco81

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I see Amazon will now put ads in our video streams unless we fork over an additional $2.99 a month. The enshittification continues unabated.
This one in particular really galls me. It's not like they added a cheaper tier but with ads, as everyone else did, they just took value away from the existing tier. Semantics, sure, but the optics are so transparently shitty. At least boil me slowly, Amazon.
They made dumb decisions like spending hundreds of millions, maybe at least a half billion each, for Rings of Power and Citadel.
 

wco81

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42% price increase and only a 7% loss of subscribers (if it keeps to that) would be a win. Not for you, but for Apple.
That's just the first month and it may not yet have gone into effect yet. So they announced it. Maybe it didn't really affect the churn that much.

But it could hurt new subscriber growth as well as increase overall churn.
 

wco81

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There have been recent rumors about WBD buying Paramount.

Discovery took on a lot of debt to acquire WB to form WBD. They raised prices, for the Discovery content which by itself wasn't attracting too many subscribers.

Paramount + is pretty thin on original content other than Star Trek and is losing money. It would either get folded in or shut down as a separate service. They are just now integrating it into Paramount + with Showtime starting in January.

Consolidation or just removing more of the competition, which means higher prices.

Let's see how much Netflix tries to push prices.
 

Chris FOM

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The other problem is figuring out what a legit price for this actually is. If you go way back to premium cable channels you were looking at $15/month or so for a rotating cast of movies plus a limited amount of original programming (sure everyone associates HBO with high cost, high production shows like The Sopranos, The Wire, Game of Thrones, etc, but forget that those shows often didn’t run concurrently). Netflix then started the streaming services and started out dirt cheap, but were offering only licensed stuff that was largely cast-offs and niche material (House of Cards was their first major original production and came out in 2013).

Problem is, none of these models scale very well. If you look at the volume of content being produced by any of the current services it dwarfs what we saw 10 years ago. Even Apple TV+, which has some of the lowest output of new original stuff, is producing vastly more than Netflix was at that time. This isn’t a case of greedy companies trying to gouge customers. The harsh reality is nobody besides Netflix is making money. So sure you can finance classic HBO on customers paying $15/minth, but you can’t run Warner Bros. on it. Disney could license their older movies to Netflix for some extra revenue but Disney+ is a 10-digit money pit. And an indefinite loss can’t go on forever. Plus there’s all the fallout from box office revenue being down massively along with the huge drop in purchased movies (the studios did themselves no long-term favors by shortening or even eliminating the theatrical and purchase-only windows and teaching customers to just wait for streaming). Some combination of increasing prices and decreasing production is not only inevitable but mandatory until they start making money.
 
This one in particular really galls me. It's not like they added a cheaper tier but with ads, as everyone else did, they just took value away from the existing tier. Semantics, sure, but the optics are so transparently shitty. At least boil me slowly, Amazon.
They already had an "ad tier" which used to be called IMDB-TV rebranded to Freevee.
 

wco81

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I don't think it was irrational. Clearly WB and Disney will continue with streaming, because theatrical and linear TV are not reliable, so they have to have some alternative strategy.

I guess it was a question of how well the NF brand would hold up.

Someone suggested one of these studios or media companies should concentrate on producing content. But the reason why there was so much content being produced was because of these competing streaming services.

There wasn't going to be demand for the volume of new shows on cable TV.
 

wrylachlan

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Some combination of increasing prices and decreasing production is not only inevitable but mandatory until they start making money.
I think you’re absolutely right that the volume of quality TV is off the charts - they’re just producing tremendous amounts of it. It’s an incredible amount of TV to be producing on top of what’s being produced for broadcast TV. But the end goal that they’re shooting for is for streaming content to displace broadcast TV not be additive to it. And I’m not convinced that the volumes they’re producing are unsustainable in the absence of broadcast TV.

So I think the goal remains to convince people to cut the cord and move to streaming, creating sufficient subscription volume to make current programming profitable.

Honestly, the best thing streamers could do would be to find a solution to the ‘Local Station’ + sports. Do that in a way that kills broadcast and profit. But absent that it will be a long drawn out death and streamers will be in hard times waiting for it.
 

wco81

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I don't think local station offers much content these days, other than local news.

And they have sports because they of the TV deals and laws tied to the broadcast days.

But most people are watching sports through cable. This year, Peacock is just starting to offer some NFL games for streaming and this past weekend, they had an NFL game which was exclusive to them.

I guess local stations still wield enough power to prevent the networks and sports leagues from cutting them out of the distribution but the reality is, they're no longer needed, though I don't know if the network-owned streaming services like Peacock can accommodate all the viewers that network affiliates across the country serve. So millions or tens of millions of viewers each week.

Well actually the networks own their own stations in some of the biggest markets so they have financial incentives to keep local affiliates alive.

I wonder though if cord-cutting continues, around 2030, NFL will be looking for a new contract and whether the networks can keep raising their bids for TV rights.

If they let streamers take over those rights, that's going to accelerate the decline of viewer base.
 

Dano40

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It just shows they think they can make money, not that they do.

Judging from the amount of flops in movies they have had recently, Disney's judgement isn't that great

None of the streaming services Music or Video are making money, they all hope they will the business plan is just not good after 3 or 4 subscriptions most people say that's it. After all how many monthly payments can you have even reckless spenders have limits?
 

Dano40

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The other problem is figuring out what a legit price for this actually is. If you go way back to premium cable channels you were looking at $15/month or so for a rotating cast of movies plus a limited amount of original programming (sure everyone associates HBO with high cost, high production shows like The Sopranos, The Wire, Game of Thrones, etc, but forget that those shows often didn’t run concurrently). Netflix then started the streaming services and started out dirt cheap, but were offering only licensed stuff that was largely cast-offs and niche material (House of Cards was their first major original production and came out in 2013).

Problem is, none of these models scale very well. If you look at the volume of content being produced by any of the current services it dwarfs what we saw 10 years ago. Even Apple TV+, which has some of the lowest output of new original stuff, is producing vastly more than Netflix was at that time. This isn’t a case of greedy companies trying to gouge customers. The harsh reality is nobody besides Netflix is making money. So sure you can finance classic HBO on customers paying $15/minth, but you can’t run Warner Bros. on it. Disney could license their older movies to Netflix for some extra revenue but Disney+ is a 10-digit money pit. And an indefinite loss can’t go on forever. Plus there’s all the fallout from box office revenue being down massively along with the huge drop in purchased movies (the studios did themselves no long-term favors by shortening or even eliminating the theatrical and purchase-only windows and teaching customers to just wait for streaming). Some combination of increasing prices and decreasing production is not only inevitable but mandatory until they start making money.

Netflix making money? They are struck in a forever low margin businessl and once the Koreans discover their actual bargaining power the honeymoon will be over.
 

Shavano

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I think you’re absolutely right that the volume of quality TV is off the charts - they’re just producing tremendous amounts of it. It’s an incredible amount of TV to be producing on top of what’s being produced for broadcast TV. But the end goal that they’re shooting for is for streaming content to displace broadcast TV not be additive to it. And I’m not convinced that the volumes they’re producing are unsustainable in the absence of broadcast TV.

So I think the goal remains to convince people to cut the cord and move to streaming, creating sufficient subscription volume to make current programming profitable.

Honestly, the best thing streamers could do would be to find a solution to the ‘Local Station’ + sports. Do that in a way that kills broadcast and profit. But absent that it will be a long drawn out death and streamers will be in hard times waiting for it.
What's the point of that? Local stations I get off my antenna for nothing. For sports there's huge competition because it's very lucrative.

In general I disagree that local TV is even a problem for national streamers. Most of the people that are interested can just get it off the air, and it doesn't have a lot of content that competes with what they stream now. In fact there's not nearly as much new content on broadcast TV as there used to be. The trouble they face is mostly the other streaming providers that are competing for the same customers but the customers have limited attention and limited dollars. The more they charge the more customers decide it's not worth it and they switch to strategies like rotating services and binge watching the few shows on each service that they care about.

I think most of the content on most of the services is low value filler so you have the illusion there might be something worth watching after the first 10 hours a month.
 

wco81

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As prices increase, churn is increasing. IN the last few months, about 25% of subscribers have canceled 3 or more streaming services.

About one-quarter of U.S. subscribers to major streaming services—a group that includes Apple TV+, Discovery+, Disney+, Hulu, Max, Netflix, Paramount+, Peacock and Starz—have canceled at least three of them over the past two years, according to November data from subscription-analytics provider Antenna. Two years ago, that number stood at 15%, a sign that streaming users are becoming increasingly fickle.


Streaming services are trying to reduce cancellations, because they will have to spend more in the future in reacquisition costs of those subscribers:

Under pressure to improve profitability and avoid having to reacquire users, streamers are trying a range of tactics to retain customers, from launching lower-cost ad-supported tiersof service, to teaming up with rivals on bundled deals and providing discounts or free months of service.

But a lot of subscribers re-subscribe within a few months:

One in four people who cancel a premium streaming service typically resubscribes to that service within four months, and one in three does so within seven months. Half do so within two years.

So streaming services are adjusting to these patterns and looking for long-term relationships with subscribers where they expect a certain number of them will subscribe, unsubscribe, resubscribe, etc.

Some of the enticements, to downgrade their service -- which is great for Netflix since they have so many tiers -- to cheaper ad-supported tiers is having some success.

“Retention doesn’t just mean holding on to a new subscriber the first time they get them. It’s about managing a relationship over a true customer lifetime,” said Jonathan Carson, co-founder and chief executive of Antenna. Antenna compiles data from third-party services that collect information from consumers, with their consent, such as online purchases, bills and banking records.

Streamers will have to become more sophisticated about when they try to win back customers, he said. For example, they might target ads and marketing efforts at people who tend to watch at a certain time of year.

Ad-supported plans offer streaming services a way to attract new customers and win back those who have canceled their subscriptions and want to pay less.

Among the U.S. customers who joined Disney+ for the first time in November or converted from a trial, nearly 60% opted for the ad-supported tier. That figure was bolstered by Black Friday promotion and is up from 25% in December 2022, when the ad tier was launched.

More than one-third of new U.S. Netflix customers in November opted for the ad tier, compared with 11% a year earlier, when the ad-supported version was introduced. Streamers say ad-supported plans are a win-win for them and price-sensitive customers, bringing in revenue from monthly subscriptions as well as ad sales.



Ugh, depressing that people are going for ads, though it's to be expected because some services have set big pricing gaps between ad and ad-free tiers.
 
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wrylachlan

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In general I disagree that local TV is even a problem for national streamers.
People spend a finite amount of time per week consuming content. Every hour they’re consuming an ad-supported free OTA broadcast is an hour they’re not consuming a streaming product. And there are a couple of anchors to OTA - local news and sports. When you’re regularly going to OTA to consume news and sports it’s natural to also consume scripted TV/ gameshows, etc. there.

So if streamers could de-anchor local news and sports from OTA, they would stand to get a bigger slice of the total TV viewing time.
 

wco81

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People spend a finite amount of time per week consuming content. Every hour they’re consuming an ad-supported free OTA broadcast is an hour they’re not consuming a streaming product. And there are a couple of anchors to OTA - local news and sports. When you’re regularly going to OTA to consume news and sports it’s natural to also consume scripted TV/ gameshows, etc. there.

So if streamers could de-anchor local news and sports from OTA, they would stand to get a bigger slice of the total TV viewing time.
OTA is used by a small percentage of the populace.

A lot of them will watch local channels through cable TV and increasingly services like YouTube TV or Hulu Live, which are meant to replace cable TV.

Local channels used to be kings but with cord-cutting, I would think their revenues are in decline. Local news and weather is still a big deal with local stations but people can get that information elsewhere, on demand, without sitting through local TV newscasts.

Similarly, sports coverage is better elsewhere than local news sports segments and other programming.

Live sports are all they have. If the networks lost NFL rights, local TV would crater.

I would love to see this happen because we're still stuck with 1080i or 720p sports broadcasts. Local stations have zero incentive to upgrade their equipment and neither do the broadcast networks.

Meanwhile, 4K broadcasts of sports are more common in Europe and Japan.
 

wrylachlan

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Live sports are all they have. If the networks lost NFL rights, local TV would crater.

I would love to see this happen because we're still stuck with 1080i or 720p sports broadcasts. Local stations have zero incentive to upgrade their equipment and neither do the broadcast networks.

Meanwhile, 4K broadcasts of sports are more common in Europe and Japan.
I think I was being overly restrictive in my argument calling out OTA when what I really meant was local ‘live’ television channels whether OTA, through cable or through some other bundle. It’s all the same problem - the local station becomes an anchor that pulls people away from streaming.

And I very much agree that sports (and specifically the NFL) is a lynchpin. When the NFL inevitably goes pure streaming with their next contract local TV will be dead.
 

KD5MDK

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I can see that but on the other hand the websites of the local broadcast stations are by far the best sources for actual local news (public safety, transportation disruption, new business openings, events, etc) that I have available. There are specialist blogs and stuff for specific verticals, but if I want to know what's actually happening around me, they're the place to go. So there is a social cost if those news providers can't get revenue from their other operations.
 
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As prices increase, churn is increasing. IN the last few months, about 25% of subscribers have canceled 3 or more streaming services.




Streaming services are trying to reduce cancellations, because they will have to spend more in the future in reacquisition costs of those subscribers:



But a lot of subscribers re-subscribe within a few months:



So streaming services are adjusting to these patterns and looking for long-term relationships with subscribers where they expect a certain number of them will subscribe, unsubscribe, resubscribe, etc.

Some of the enticements, to downgrade their service -- which is great for Netflix since they have so many tiers -- to cheaper ad-supported tiers is having some success.







Ugh, depressing that people are going for ads, though it's to be expected because some services have set big pricing gaps between ad and ad-free tiers.
I don't know why other people's choices are depressing.

Again, consider that most OTA and Cable content is consumed with Ads. Most people are probably just looking at it as a push.

Streaming again is primarily a time shift tool +some new good content. ad removal isn't really a part of the equation.



anyway, on the topic of subscriber churn. I've seen a lot of churn from some of my friends group as pricing changes....they tend to just follow the content they want to consume and when a service stops providing, they drop it.

Netflix and Disney are the ones that MIGHT stay. Though with Disney as we've said many times, it depends on the content that interests you.


I suspect the merging of Hulu could change this.
 

wrylachlan

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So there is a social cost if those news providers can't get revenue from their other operations.
Couldn’t agree more. We’re already seeing negative impacts from the loss of local newspapers. The loss of local TV news will only compound that. Our local NPR station merged with our local PBS station to become a single entity and they have podcasts as well as a pretty robust web site. I wonder if that’s the future of local news - organizations with a single pool of reporters who report across multiple media formats. Granted public media is very different from commercial media, but once you stop having to pay for a massive tower as the price of entry, having a single team do writing, audio, and video should be much more achievable in small markets even for commercial organizations.
 

wco81

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Local papers did journalism. I don't think local TV stations were winning nearly as many Pulitzers.

Local journalism, especially investigative journalism at the local and state level, that ship has probably already sailed.

We have the big newspapers in the big cities and maybe a dozen of the next largest cities or news groups.

And those papers will need to acquire and retain enough subscribers but maybe they're not staffing as many top journalism school grads and having them move up the ranks any more.