Pricing yourself out of the entertainment market?

 

That's what Ted Gioia claims Apple, Disney+ and other streaming entertainment services are doing to themselves by continually raising prices.  After detailing just how much more those services are charging today, he notes:

Years ago, I claimed that streaming economics were broken, and price increases were inevitable. But I never anticipated the rapacious response of the suits in the C-suite.

The short explanation is that they do it because they can. Sure, some people cancel their subscriptions, but not enough to make a difference. Most subscribers simply put up with it.

That’s why the streamers keep boosting prices again and again. They will continue doing it until they encounter serious resistance—and they haven’t hit it yet. So I expect more of the same.

But there’s a danger to this business strategy. Look at Las Vegas, where tourism is collapsing because the casinos went too far. For a long time, the public didn’t flinch in the face of price hikes, but then it got ridiculous:

• $95 ATM fees
• $14 coffee
• $50 early check-in fees
• $30 cocktails

The casinos have now earned a reputation as exploitative price-gougers. Tourism is now down sharply—hotel occupancy has dropped 15%. The city feels “eerily empty.”

This isn’t easy to fix. Once you destroy your reputation and lose the customer’s trust, it’s almost impossible to get it back. That happened in an earlier day to Sears and K-Mart, and they never recovered.

Something similar may already be happening at Disney’s theme parks. Some visitors report that Disney World is empty—looking like a ghost town even during Labor Day weekend.

They squeezed customers too many times, without increasing value. And Disney is now trying to do the same thing with streaming. Let’s see how it plays out.

The streamers are following a very simple strategy: (1) Raise prices and (2) Cut costs. You might notice that improving quality and reputation are not part of this equation.

In business strategy this is known as an endgame maneuver. It works in the short run, and is smart if you’re running a dying or declining company. Squeeze all the cash out of it that you can, before everything collapses.

This is also a popular strategy with private equity funds. They specialize in acquiring wounded businesses, and making these same moves.

But when prestige companies like Apple and Disney act this way, you really need to scratch your head. Why are these (once) respected businesses treating their own brands the same way a private equity firm deals with a declining industry?

These companies were once focused on innovation and rewarding customers. That could happen again, but not under the current leadership.

Until that leadership changes, expect to see more price increases. And if you want to stop it, don’t complain—just cancel.

And if you’re totally fed up with streaming costs, consider switching to books. I hear they offer a sweet deal on them down at the public library.

There's more at the link.  If you follow the entertainment industry at all, particularly from a business and economic perspective, Mr. Gioia should be on your daily reading list.

I can't say any of this has affected my wife and myself directly.  We don't even own a TV, because there's hardly anything worth watching on it, so the cost of streaming services isn't in our budget.  As for visiting places like Las Vegas or Disney World, we aren't interested in what they have to offer.  Our only trip to Las Vegas was to a writers' convention a few years ago, and we were stunned by the prices demanded for ordinary, everyday goods and services.  We reckoned the cost of living in Las Vegas was at least double, and in some cases triple, what we paid at the time in North Texas.  We fled back to sane pricing as soon as we could, and we aren't about to be fleeced again, thank you very much.

Nevertheless, I know a lot of people do spend money on these things, and I hear more and more complaints from them about their affordability.  I'm not necessarily very sympathetic, you understand:  to me, one prioritizes one's purchases around everyday importance.  Housing, food, transport, school, etc. are a lot higher priority than what's on the TV screen!  However, I know there are families actually cutting back on food purchases in order to pay for multiple subscription TV services each month.  I can only hope that they come to their services before things get completely out of hand.  (I don't suppose it helps that the very TV services they can't afford are constantly advertising food, entertainment, etc. that they can afford even less!)

Oh, well.  I guess the entertainment moguls will go on extracting every penny they can from an increasingly impoverished audience, until the consumer can no longer afford them - then they'll demand a government bailout for their "industry" . . . and guess whose tax dollars will be expected to pay for that?

Peter