Is television too cheap? It might not feel like it, with invoices for streaming services piling up in your inbox, but in cash terms, viewers have never had it so good. Netflix has burnt billions of dollars to win and retain your business. Amazon and Apple are spending freely in the hope of enticing you to their other services. Every new service, from Mubi to Disney Plus, arrives dangling a tempting offer. Stuck at home, glued to your phone or laptop or TV, you are being courted by the most aggressively generous strategies in entertainment history.

The value might not be obvious, however, because for most British viewers, TV costs more than ever. From the early 1990s until recently, the UK had a two-tier system. You paid your licence fee and received the free-to-air channels, or you paid several hundred pounds more a year for satellite or cable. Exactly how much more depended on your craving for films or sport, but there wasn’t really a halfway measure.

“The UK was sort of a Goldilocks,” says the tech writer Benedict Evans. “Half the market had pay TV and was happy with it and half the market was happy not having it.” Compare this with the US, where about 85 per cent of households had cable, and with a chronically underserved European market, and British TV seemed a happy medium.

No longer. Thanks to today’s abundance of streaming options, TV has become a chaotic free-for-all that seems to get more expensive every year. In February, the standard Netflix two-device package went up £1 to £9.99 a month, and the premium family-friendly multi-screen option up £2 to £13.99 a month. Disney Plus costs £5.99 a month or £59.99 a year (rising to £7.99 a month or £79.90 a year for new customers from February 23). Amazon Prime is £7.99 per month, albeit with shopping benefits. Apple TV Plus is £4.99 a month.

The cultural conversation has moved on, too. Even 10 years ago, not having a Sky subscription was unlikely to exclude you from the water-cooler. Today, if you want to be up on Bridgerton, The Crown, Little Fires Everywhere or other chattering-class staples, the cost of TV has risen sharply. Recently, I signed up for Sundance Now, a channel available through Amazon, purely to watch hit French spy thriller Le Bureau. Failing to finish it before the free trial expired meant paying another subscription of £5.99 a month.

The data suggests I’m not alone. “There has been a steady increase in the average UK spend in recent years,” says Richard Broughton, director of research at data analysis company Ampere, referring to the average household’s annual discretionary spend on TV products — excluding the licence fee. “It was £300 per household per year, and it’s heading towards £400.” Most of the new money has been additive, meaning viewers are adding to their spending, rather than replacing packages with Sky. The average spend on streaming services has gone from less than a pound per household in 2010 to nearly £80 in 2020.

Top 10 revenue-earners in British TV

Covid-19 “has accelerated some of the underlying trends,” Broughton adds, “but it is easy to overstate its impact.” TV is more important when the pubs and cinemas are shut, but there are signs that in the US, spending might be near its peak. From a high of more than 100m households in 2014, cable has seen its figures falling fast. As streaming services have exploded, an average of 3m households a year have “cut the cord” in the past decade. Last year, 6m disconnected — twice the usual rate. The total number of cable subscribers in the US now stands at about 75m.

“The overall outlay in the US is about $900 per household per year,” says Broughton. “I don’t think that’s really going to change.”

The success of Disney Plus, which has attracted more than 100m subscribers in less than two years, has understandably inspired imitators, and every brand now craves a direct relationship with its consumers. Yet already there are signs that many of the new generation of streamers will eventually be re-aggregated. It’s difficult to get a new Sky subscription without Netflix included, but the cheapest option is £25, which makes Sky look like bad value.

Until recently, Netflix burnt cash to win subscribers. It was successful, in that the service now has more than 200m paying customers, but it came at a cost of more than $15bn in loans. The company says further borrowing is unnecessary and it is “cash-flow positive”. Supporters say its scale, first-mover advantage and depth of original programming give it an unassailable lead over its competition. The group’s astronomic market capitalisation agrees with them. This year Netflix is releasing a film a week. At last weekend’s Oscars, it won seven awards, more than any other studio. Its CEO, Reed Hastings, is fond of saying that it is “competing with sleep”.

A more bearish take is that Netflix has hoovered up as many valuable US subscribers as it can, that its future expansion will be in lower-value customers in poorer countries, and that it is vulnerable to rivals who can charge less for more. Last week its share price fell about 10 per cent after it announced lower than expected subscriber growth.

The rise of Amazon and Netflix

Despite Netflix’s years-long resistance to introducing ads, some analysts argue they will have to buckle. “They’ll have to have a two-tier pricing system [with one including advertising], because it brings you back to the traditional model of two revenue streams,” says Laura Martin, a senior analyst at Needham & Co. “The problem is it’s the incumbent. If you are a new streaming service, the easiest place to get subscribers is from [Netflix], because their customers have already shown a proclivity to watching streaming content.”

The streamers are not all born equal. Netflix’s business depends on its content, which it either has to buy in or make itself. Until now it has kept its prices low to drive growth. This month’s price rise shows it can’t do so forever. Its competitors benefit from extensive back catalogues or other businesses that enable them to run their TV arm as a loss-leader.

“Amazon are able to subsidise their TV offer with the fact they’re making margins on consumer products,” says Broughton. They can lure customers in with Phoebe Waller-Bridge, knowing they’ll make back the millions they’re paying her by selling dishwasher tablets to her audience. For Apple, he says, their original content is a way of increasing the replacement rate on their devices.

For Disney and NBC’s Peacock, there’s a deep well of beloved programmes to draw on. Peacock’s latest experiment is to offer a couple of series of the US version of The Office for free, but then charge specifically for that programme. It’s another possibility for the future that certain series — Game of Thrones springs to mind — could command entire subscriptions on their own.

“Other companies have 50-year-old libraries where the content was created over a long period of time and has billions of marketing dollars behind it,” says Martin. “Even hit shows from the past, like M.A.S.H. or I Love Lucy, that have been off the air for decades, have a lot of muscle behind them, so they have a lot of value. Netflix spends money on a show that might be as good as The Office, but nobody’s ever heard of it.” By offering historic IP or new programming at a lower price point, Netflix’s rivals will continue to close the gap.

You could argue that the price of TV is a problem for the market to work out. But the pricing of these services has powerful implications for public service broadcasters, especially the BBC. A consensus is building that the licence fee as it stands is unsustainable, and not only among the BBC’s ideological opponents. Earlier this year the BBC issued a report claiming its services would cost £450 in the open market. But its engagement is in freefall — the amount of time an adult spent watching broadcast BBC TV had dropped 30 per cent in 10 years, especially among the young, those most likely to subscribe to streaming services. Even by framing the argument in these terms, the BBC risks inviting a toe-to-toe comparison with Amazon and others. It’s a dangerous game: the BBC’s total revenue is just under £5bn a year; Amazon’s overall income is the same amount in a week.

“It amazes me that UK politicians act as though we’re having the same argument about the BBC as we were having 20 years ago,” Evans says. “It’s completely different. Technology has thrown the cards in the air, and nobody knows where they’re going to land.”

For better or worse, news and entertainment will be living with the consequences of this great restructuring for decades. In the original telling of Goldilocks, the heroine is so spooked by her encounter with the bears that she runs off screaming into the woods, never to be seen again.

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This article has been amended to correct Peacock’s connection to NBC