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How Does Streaming Entertainment Economy Work? 




May 19, 2022~For those who have wondered how platforms like Hulu, HBO, or Netflix work and make money, this is the article for you. We’ve compiled information regarding how stream services make profits, amongst other crucial things revolving around the topic. 

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Moving on, here’s what’s happening behind the scenes of your most-used streaming platforms.

Overview: Stream Entertainment

Streaming offers its viewers tv shows, movies, documentaries, and so on through their websites and mobile apps. Streaming killed Cable TV and revolutionized our generation’s way of watching something. It’s TV on the go. Watch anytime, watch anywhere, and watch as many episodes as you want. This is all done while connected to a WIFI connection.

In the past, most people could only watch one episode per week of their favorite TV show, and that’s probably one of the reasons why streaming became so successful and popular. People wanted to move past that. 

Streaming platforms are also typically free from advertisements, unlike Cable TV, where ads are placed in between shows. Streaming platforms are also much cheaper than cable tv. Cable costs about $100 (more or less) a month while streaming services like Netflix costs a measly $13. 

Some popular services include:

  • Netflix
  • Hulu 
  • Amazon Prime Video
  • Paramount
  • Apple TV

Those are just to name a few. Since Netflix popularized the stream entertainment model, many other companies have joined this field to compete. 



Economics Behind Streaming Entertainment Services

This is how it works. Services like Netflix, for example, buy the licensing rights to content like movies or TV shows. At the same time, they also produce their own content, which Netflix is doing a lot right now. They tend to collaborate with existing production companies to make their own shows. That’s why you see so many Netflix original series from all across the globe. It’s genius in a sense, or at least innovative. 

In Netflix’s case, the economy running it isn’t powered by advertisements. Some streaming services do profit a small portion out of ads, on the other hand. For example, Hulu’s lowest-priced subscription comes with ads, but only a limited number of them. 

Continuing on with original content has definitely helped Netflix become an even bigger powerhouse. Shows like ‘Squid Game,’ which was a Netflix original, became so popular when it was released on the platform that it boosted Netflix’s sales, revenue, and popularity substantially. It wasn’t only Squid Game that helped Netflix stay relevant and extremely popular, but shows like ‘Orange is The New Black’ amongst others were also Netflix originals that helped the platform become such a strong household name.

Streaming And Its History

Streaming Entertainment unsurprisingly began with Netflix in 2005. The company started out as an on-demand video streaming service that provided its members the ability to watch what they wanted when they wanted. This standard soon after became the global standard for watching shows, and no more waiting around for next week’s episode on Channel 10. 

Streaming also became popular and succeeded in its global domination because of internet connection. Without an internet connection, streaming isn’t possible, so let’s just say Netflix was in the right place, and at the right time, since the internet was slowly becoming better and better. 

Present Situation 

Reportedly, in 2017, the combined revenue of subscription-based streaming platforms and TV video-on-demand services was greater than the revenue of the U.S. theater box offices. This claim was further proven by the Motion Picture Association’s annual report in March 2022. 

At the moment, stream entertainment is still the most popular and used way to watch movies and TV shows. However, this landscape is not above the ever-changing nature of the digital world; perhaps a contender will come in the future. Leaving streaming platforms in the dust, as it did with cable TV.

Profit and Growth Blocks 

In the case of Netflix and most streaming platforms, their primary revenue comes from subscriptions, but the model that once drove them to popularity and success is beginning to slow them down.

For example, in the case of Netflix, its password-sharing feature has meant its stagnation in growth. Password sharing is the feature where multiple people can use the account without having to pay a new subscription. Since four profiles can use one account, it’s pretty easy not to subscribe to enjoy. Unfortunately, this is one of the main reasons why Netflix is stagnating. Plus, they have to always look out for competitors. 

Another thing that blocks the growth of streaming services is that they use up too much bandwidth. So in countries where the internet is very slow, streaming services can’t work properly since they require a lot of bandwidth to begin with. 

Perhaps in the future, platforms will find a way to stream their content without using up so many connection resources in order to have their service accessible to even the most remote places in the world. But for now, it’s a dilemma. 

Final Thoughts

The economics that drives the streaming industry is pretty straightforward to grasp, and we hope our article has provided our readers with the answers they were looking for. This model of watching shows is a massive deal of the moment, but we advise our readers not to spend all their time binge-watching all their options, even if they have the ability to.