Explained: How streaming services make their money

Streaming changed how the world watches TV. But after years of chasing subscribers at any cost, the industry is now focused on making money. Here’s how streaming services earn their revenue, and why your bill keeps going up.

Streaming services deliver TV shows, films and sport over the internet, so viewers can watch what they want, when they want.

Netflix led the way, switching from posting DVDs to streaming in 2007. Since then, media companies including Disney, Warner Bros, Paramount, Amazon and Apple have launched their own services. In Australia, local options include Nine’s Stan, Foxtel’s Binge and Kayo, and free services from the commercial networks, the ABC and SBS.

Subscriptions

The main source of revenue is the monthly subscription. Services earn more by adding subscribers and raising prices.

For years, streamers prioritised growth. They spent billions on original shows and films, and kept prices low to win customers. Investors rewarded subscriber numbers, even when services lost money.

That changed around 2022, when subscriber growth slowed and investors began demanding profits. Since then, most services have raised prices, cut spending on content and focused on keeping subscribers from cancelling.

Netflix also cracked down on password sharing in 2023, requiring people outside a household to pay extra or get their own account. It led to a surge in sign-ups.

Advertising

Many streaming services now offer cheaper plans with ads, including Netflix, Disney+, Stan and Amazon Prime Video, which added ads to its standard plan. Advertising brings in extra money from each viewer and attracts people who don’t want to pay full price.

That has put streaming services in direct competition with traditional TV networks for advertising dollars.

Sport and the bigger picture

Live sport has become a major battleground, because it attracts loyal subscribers and big audiences that advertisers want. Streamers are increasingly bidding for major sports rights against traditional broadcasters.

Netflix has become the clear industry leader, with hundreds of millions of paying households worldwide and large profits. Many rivals are still working to become consistently profitable, which has led to mergers, bundles of services sold together, and services shutting down.

For viewers, the result is more choice, but also more subscriptions to juggle and higher monthly costs, which is why some people now rotate between services, signing up for a show and cancelling once it’s done.