54 Business TheEconomistFebruary12th 2022
basicplanfrom$6.60to$2.60amonth.
MorganStanleynowexpectsNetflix’stotal
revenuetogrowbyabout10%a yearinthe
mediumterm,notthe15%ormoreithad
previouslypredicted.
Asrevenuegrowthslows,costsswell.
Mediafirmswillspendmorethan$230bn
onvideocontentthisyear,nearlydouble
thefigurea decadeago,forecastsAmpere
Analysis,a researchfirm.Netflix’sweakre
sults camedespitewhat it billedas its
“strongestcontent slateever”, including
“SquidGame”,itsmostpopularseries,and
“Don’tLook Up”,whose shortlisting for
BestPictureonFebruary8thcontributedto
Netflix’shaulof 27 Oscarnominations,the
mostofanystudio. Disney+isdoingfar
betterthanitsparenteverdreamed—butit
iscostingmore,too.ThreeyearsagoDis
neysaidit wouldspend about$2bnon
streamingcontentin2024.MrChapekre
centlysaidthefigurewouldsurpass$9bn.
Spending is going uppartly because
costsoffilminghaverisen.Thefinalsea
sonofWarnerMedia’s“GameofThrones”,
in 2019, cost around $15m an episode,
whichthenseemedsteep.Amazon’sserial
ised“LordoftheRings”,dueinSeptember,
reportedlycostfourtimesasmuch.Audi
enceshavebecomemoredemanding.Most
peopleusedtocanceltheircabletvsub
scriptiononly whentheymoved house,
saysDougShapiro,a formerstrategychief
atTurnerBroadcastingSystem,atvcom
pany.Now,hesays,theyare“becomingac
customedtochurningonoroffoverthe
qualityofcontent”,signinguptodevour
thelatesthitthencancellingtheirmem
bership.Appletv+,whichhasthemostse
riousretentionproblem,losesa tenthofits
customerseverymonth,accordingtoAn
tenna,a datafirm,meaningthateveryyear
itchurnsthroughtheequivalentofmore
than100%ofitsmembers(seechart).
The combination ofrising costs and
slowingrevenuegrowth“callsintoques
tiontheendstateeconomicsofthesebusi
nesses”,arguesMoffettNathanson,a firmofanalysts.Netflix,themostsuccessfulof
thebunch,expectsitsoperatingmarginto
shrinkin2022,forthefirsttimeinatleast
sixyears,to19%;thefirmhasattributed
thistohigherspendingonprogramming.
MoffettNathansonaddsthatthesefigures
flatter thecompany’s performance. Like
otherstreamers,Netflixamortisesthecost
ofcontentoverseveralyears,wheninreal
itymostofitsshowsarebingedina matter
ofweeks.(Thefirminsistsitsamortisation
scheduleisbasedonviewingpatterns.)
Streaming’spinchedeconomicsarees
peciallygallingforoldmediacompanies
suchasDisney,whichareusedtothefar
more profitable cabletv business. Last
yearDisneyreportedanoperatingmargin
of30%foritslineartvnetworks,a typical
figurefortheindustry.TheaverageAmeri
cancablebillisnearly$100a month—and
viewersareusuallysubjectedtoadvertis
ingtoboot.Mediafirmsareaccelerating
thedeclineofthisprofitablebusinessby
shiftingtheirbestcontentfromcableto
theirstreamingservices.Theyarealsofor
goingboxofficerevenuebysendingmov
iesstraighttostreaming(thoughcovidre
latedcinema closures haveoften forced
theirhand).AnimatorsatDisney’sPixar
studioaresaidtobemiffedthat“Turning
Red”isnotgettinganoutingatthecinema
inmostcountries.
Thereislittlechoicebuttostickwith
the strategy. Cable is not coming back;
streamingisexpectedtoaccountforhalfof
tvviewinginAmericaby2024.Thefocus
isturningtohowtomakethenewbusi
ness moreprofitable.Streamersincreas
inglydripfeednewepisodesratherthan
droppingentireseries.Bundlingisbecom
ingmorecommon:DisneysellsDisney+
alongwithespn+,itssportsstreamer,and
Hulu,a generalentertainmentservicethat
it jointlyownswithComcast,a cablegiant.
AppleandAmazonbothpackagetvwith
otherservices.WarnerMediaandDiscov
eryplantomerge;regulatorshavewaved
thedealthrough,thecompaniessaidonFebruary9th. Theremaybemoretocome.
“If Netflix is decelerating more rapidly
thanexpected,thegreatstreamingrebun
dlingmayneedtobeginsoonerratherthan
later,”writesBenjaminSwinburneofMor
ganStanley.
Thehopeatthebigmediafirmsisthat
thestreamingwarswilleventuallyclaim
somecasualties,leavingthesurvivorsfree
toraisepricesanddialdownspendingon
content. Peacock,Comcast’sstreamer,is
trailing. Viacomcbs, which owns Para
mount+,isthesubjectofendlesstakeover
rumours.Buteventheirexitwouldleave
some determinedrivals.WarnerDiscov
eryisbettingitsfutureonstreaming.Ap
pleandAmazonaregettingbetteratmak
inghits,andhaveenoughmoneytorunat
a lossforaslongastheylike.Disneyand
Netflixaren’tgoinganywhere.Itlookslike
beinga longwar,shortonspoils.nTuning in...and outSources:AmpereAnalysis;Antenna †Includesestimates *Activeviewers onlyGlobalstreaming-TVsubscribers†
m
8006004002000
2019 20 21Discovery+
Peacock
AppleTV+
Paramount+
Hulu
HBOMax Disney+
Amazon*NetflixNetflixDisney+Discovery+HBOMaxHuluParamount+ShowtimeStarzPeacockAppleTV+121086420United States, streaming-TV monthly
subscriber churn, December 202 estimate, %IndustrialtechnologyAutomation Inc
S
hortages andbottlenecks have been a
source of constant frustration for
manufacturers around the world for two
pandemicafflicted years. For a handful of
companies in the business of keeping fac
tories running and supply chains intact,
these frustrations have been a source of
cheer—and profits. Japanese makers of in
dustrial equipment, in particular, have
seen orders surge as companies turned to
automation, first amid the disruption
wrought on human workforces by co
vid19, then as a result of tight labour mar
kets and rising wage costs.
The world’s stock of industrial robots
has tripled in the past decade. According to
the International Federation of Robotics, a
trade group, Japan furnishes 45% of new
ones each year. It also produces lots of
other automation equipment, from laser
sensors to inspection kit. Even after the re
cent selloff in tech stocks, Japan’s four
standout gear producers—Keyence, Fanuc,
smc, and Lasertec—are collectively worth
two and a half times what they were five
years ago (see chart on next page). Last year
the founder of Keyence, Takizaki Takemit
su, briefly became Japan’s richest man. His
$29bn fortune is half as large again as that
of Son Masayoshi, a flamboyant tech inves
tor who is corporate Japan’s most globally
recognisable face (see Schumpeter). Mr Ta
kizaki’s firm and its fellow equipment
makers are hardly household names. But
the hardware they produce is becoming asH ONG KONG
A little-known pinch-point in global
supply chains