Prof G Markets: Fourth Quarter Review — with Aswath Damodaran

Consolidation

The streaming industry is on the brink of significant consolidation, driven by the unsustainable nature of its current business model. Aswath Damodaran highlights that streaming services, as they stand, are not profitable, leading to a future where only a few major players dominate the market 1. He anticipates a scenario similar to cable, where consumers pay substantial fees for a limited number of services. Scott Galloway adds that this consolidation is a natural outcome of overinvestment and shrinking margins, likening Netflix to a powerful force that competitors must unite against 2.

I wouldn't be surprised if you're paying $50 a piece for each streaming service.

--- Aswath Damodaran

This shift reflects a broader trend in media history, where new entrants disrupt existing structures, leading to eventual consolidation.

   

Pricing Impact

Consolidation in the streaming industry is poised to significantly impact pricing strategies, potentially increasing consumer costs. Damodaran notes that the promise of cheaper content through innovation has not materialized, with prices likely to rise as fewer companies control the market 1. Galloway observes that as the market shrinks, companies will be forced to cut costs and consolidate, further driving up prices 2.

This make 50 shows every week thing is not working.

--- Aswath Damodaran

The shift towards fewer, larger players could mean higher subscription fees, reminiscent of the traditional cable model.

   

Sports Streaming

Sports streaming is emerging as a pivotal area within the broader streaming landscape, with new ventures and partnerships reshaping the market. Damodaran points out that live sports content offers unique value, prompting companies like ESPN to break free from traditional cable constraints 3. Galloway suggests that sports streaming will complement existing services like Netflix and Disney, rather than replace them, adding to consumer costs 2.

Sports is still something people tune in live for, such that they will endure advertising.

--- Scott Galloway

This evolution highlights the strategic importance of live content in attracting and retaining subscribers.