The Future of TV Streaming in a Changing Industry

On June 4, 2024, the Government of Canada announced a new tax under the Online Streaming Act that would require streaming services making over $25 million CAD per year to pay a 5% tax on their Canadian revenue. This tax is estimated to generate $200 million CAD per year in funding that would go towards supporting local news, French-language content, Indigenous content, and content created by and for equity-deserving groups. The Canadian Taxpayers Federation has warned that this new tax will lead to increased prices for consumers. In countries that have imposed streaming taxes, such as France, companies like Spotify have followed by hiking its subscription prices. 

However, price increases are not the only answer to streaming profitability and boosting revenue for most streaming services. The New York Times interviewed the industry’s leaders, including Netflix CEO Ted Sarandos and Amazon’s Prime Video head Mike Hopkins, on where the streaming industry is heading. The answer: Advertisements.  

In 2022, Netflix introduced a discounted ad-supported subscription for $6.99 USD per month. Competitors of Netflix including Disney+, Hulu, and Amazon all offer cheaper ad-supported subscriptions. Netflix is on track to generate advertising revenue of up to $1 billion USD by the end of 2024. In the fiscal year between October 2022 to September 2023, Disney reported roughly $7.4 billion USD in advertising revenue. Executives have indicated that subscription prices for ad-free tiers can be increased to encourage consumers to turn to ad-supported subscriptions. What used to be one of the biggest selling points of streaming services — entertainment free from advertisements — may be no longer viable. 

According to Bob Chapek, a former CEO of Disney, advertisers are inclined to pay more for mass audiences, which incentivizes streaming services to produce programs with broad appeal as opposed to niche content. Streaming services also have the ability to target advertisements to specific users and demographics. While catering to mass audiences can influence the type of content being product, Netflix and Amazon executives have promised not to compromise high-quality programming.  

As streaming services navigate a changing industry, they must strike a balance between the quality of content, increasing subscription prices, and introducing more advertising.