Online listening services are filling up with users, but are increasingly having doubts about the viability of their subscription-based business model. While cable and cinemas have seen declines in recent years, they remain surprisingly much more profitable than platforms.
“The subscription model is showing its first weaknesses. A lot of promises were made a few years ago, and here we are at the reality check. And the reality is that these platforms don’t generate enough profits. We sense a certain disillusionment,” 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 must have been disillusioned to see the giant Disney announce the layoff of 7,000 employees last week. Though Disney+ has seen spectacular growth since its launch in 2019, surpassing even Netflix in subscriber numbers, the platform just isn’t profitable.
What’s more, Netflix has also had a turbulent few months in recent months, as the platform saw its subscribers drop for the first time before climbing the slope in late 2022. However, the California multinational remains determined to find new revenue to offset the increase in costs.
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 advertising. In short, the business model that led to its fame and has since been imitated by all platforms needs to change. Ad-free subscriptions alone can no longer finance the countless big-budget productions on listening platforms.
“I don’t think we will go back to a no-subscription model where advertising will be the main source of revenue. But it is obvious that there are too many platforms for the demand at the moment. They won’t all be able to survive,” Mr Roberge said.
The infinite power of the cable
Platforms are proliferating, but subscriber numbers are falling or at best stagnating after peaking during the pandemic. A reality that not only the global streaming giants have to deal with, but also local platforms like Club Illico and Tou.tv.
In an interview with Le Devoir, Christiane Asselin, CEO of ICI Tou.tv, declined to say whether the Extra, the platform’s paid option, is worth it. “Competitive information,” she says. But Ms Asselin acknowledges that the wiretapping service is having to cope with a “post-pandemic” drop in subscriber numbers. “Just because it’s not profitable now doesn’t mean it won’t be later. Don’t throw the baby out with the bath water. The subscription model is here to stay. If the extra went away tomorrow morning I would get a lot of complaint emails. A lot of people have gotten used to watching their shows without commercial breaks,” she notes.
One thing is certain, ICI Tou.tv Extra and CBC Gem, its English counterpart, remain far less lucrative for the public service broadcaster than its specialty channels. In fiscal 2021-2022, subscriptions to specialty cable channels declined but still earned CBC/Radio-Canada $98.4 million, compared to $23.8 million for the paying platforms. And that’s without taking into account the advertising revenue that the state-owned company brings in thanks to its cable channels.
Therefore, by analyzing these numbers, we better understand why the public broadcaster continues to rely on traditional television. “Maybe one day no one will have cable anymore, but right now that’s not the case. So there is no drastic decision to make. It is important to be present everywhere. If people want to hear us on TV, we’re there. If people want to see us on the platforms, we’ll be there too,” sums up Ms. Asselin. She adds that regarding ICI Tou.tvs Extra, the broadcaster currently has no intention of imitating Netflix by attacking password sharing. There are also no plans to increase fares.
Quebecor (Club Illico and Vrai) and Bell (Crave) did not respond to our interview request.
The cinema is fighting back
The business model of the platforms does not come close to that of the good old cinemas either. For their part, the major American studios have entered the video-on-demand market, partly because they intend to release their blockbusters directly on their respective platforms rather than going through the cinemas. But they are now being forced to reconsider their strategy.
The comedy Magic Mike’s Last Dance, for example, was supposed to hit the HBO Max platform immediately, but the giant Warner finally decided to bring the film to theaters first. For its part, Paramount had expected the Top Gun sequel to only spend a few weeks in theaters last summer. Ultimately, given its huge box office success, the company chose to show the film longer rather than rushing the blockbuster’s arrival on its Paramount+ platform.
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 hits theaters, there’s publicity, there’s criticism, then there’s word of mouth that spans several weeks. If a film is released directly on a platform, we just talk about it for a day,” he says.