Online listening services are filling up with users, but more and more doubt the viability of their subscription-based business model. Cable and movie theaters may have experienced a decline in recent years, but they remain surprisingly much more profitable than platforms.
“The subscription model is starting to show signs of weakness. Many promises were made a few years ago, and now we have reached the reality check. And the reality is that these platforms do not generate enough profits. We feel a certain disenchantment,” summarizes Jonathan Roberge, professor at the National Institute for Scientific Research (INRS) and holder of the Canada Research Chair in New Digital Environments and Cultural Intermediation.
Some people must have been disillusioned when they saw the giant Disney announce the dismissal of 7,000 employees last week. Even though Disney+ has seen spectacular growth since its launch in 2019, even surpassing Netflix in subscriber numbers, the platform is simply not profitable.
Moreover, Netflix has also had a turbulent last few months, since, for the first time, the platform suffered a drop in subscribers, before climbing the slope at the end of 2022. But the Californian multinational remains determined to find new income to offset rising expenses.
Several Quebec users recently received an email telling them that account sharing would soon be limited to a single household. Last November, Netflix also introduced a low-cost package with ads. In short, the business model at the origin of its notoriety, and which was imitated by all the platforms thereafter, is called upon to change. Ad-free subscriptions alone can no longer finance the myriad of big-budget productions on listening platforms.
“I don’t think we’re going to go back to a non-subscription model, where advertising is going to be the main source of revenue. But it’s obvious that there are too many platforms right now for the demand. They will not all be able to survive,” said Mr. Roberge.
The infinite power of cable
There are more and more platforms, but the number of subscribers is falling, or stagnating at best, after having peaked during the pandemic. A reality with which not only the global streaming giants must deal, but also local platforms, such as Club Illico and Tou.tv.
In interview at Duty, Christiane Asselin, principal director of ICI Tou.tv, did not want to say if the Extra, the paying option of the platform, was profitable. “Competitive information,” she says. Mme Asselin recognizes, however, that the listening service must deal with a “post-pandemic” drop in the number of subscribers. “Just because it’s not profitable now doesn’t mean it won’t be later. Don’t throw the baby out with the bathwater. The subscription model is here to stay. If the Extra disappeared tomorrow morning, I would receive a lot of complaint emails. A lot of people have gotten used to seeing their shows without commercial breaks,” she notes.
One thing is certain, ICI Tou.tv Extra and CBC Gem, its English counterpart, remain much less lucrative for the public broadcaster than its specialty channels. During the 2021-2022 fiscal year, subscriptions to specialty cable channels fell, but still brought in $98.4 million for CBC/Radio-Canada, compared to $23.8 million for the platforms paying. And that’s without counting the advertising revenue that the state-owned company collects thanks to its cable channels.
By analyzing these figures, we therefore understand better why the public broadcaster continues to bet on traditional television. “Maybe one day no one will have cable, but right now that’s not the case. So there is no drastic decision to be made. The important thing is to be everywhere. If people want to listen to us on TV, we are there. If people want to watch us on the platforms, we are there too, ”summarizes Mme Asselin. She adds that with regard to ICI Tou.tv’s Extra, the broadcaster does not currently intend to imitate Netflix by attacking the sharing of passwords. A fare increase is also not in the plans.
Quebecor (Club Illico and Vrai) and Bell (Crave) did not respond to our interview request.
The cinema resists
The platforms’ business model is no match for that of the good old cinemas either. The major American studios have in turn launched themselves into the video-on-demand market, among other reasons because they intended to release their blockbusters directly on their respective platforms rather than going through cinemas. But they are now forced to review their strategy.
The comedy Magic Mike’s Last Dance, For example, was supposed to land immediately on the HBO Max platform, but the giant Warner finally decided to release the film in theaters first. Paramount for its part had planned that the sequel to Top Gun would only spend a few weeks in theaters last summer. Given the huge success at the box office, the company finally preferred to keep the film in theaters longer, rather than rush the arrival of the blockbuster on its platform, Paramount+.
A phenomenon noted by Éric Bouchard, co-president of the Association of Quebec Cinema Owners. “The pandemic allowed them to test their platform while cinemas were closed. And they saw that it wasn’t as profitable as a theatrical release. When a film is released in theatres, there is promotion, there is criticism, then there is word of mouth, which stretches over several weeks. When a film is released directly on a platform, we just talk about it for a day,” he notes.