The mid-tier of the streaming services has, in the past quarter, completed a consolidation cycle that observers had been forecasting for at least three years. Three services have merged into adjacent operators or wound down operations entirely; the surviving market now resembles, in its structural pattern, the late-stage consolidation of cable television in the previous decade.

What the consolidation produces

The consolidated mid-tier produces a smaller number of larger services that compete more directly with the top-tier services on the dimensions that subscribers actually choose between. The competitive landscape is, on most measures, healthier as a result; the casualties are the consumers who valued the niche programming that the smaller services had been able to support.

The economic logic

The economic logic of the consolidation has been visible in the underlying data for several years. The fixed costs of running a streaming service — technology infrastructure, content-licensing relationships, customer-acquisition spending — do not scale down well. Services below a defined subscriber threshold cannot, in practice, support the cost structure that the model imposes.

The content question

The content question is the part of the consolidation whose effects will be most visible to audiences. The catalog rationalisations that follow consolidations often produce gaps in available titles, particularly for international and back-catalogue programming that does not justify the licensing costs at scale.

The audiences most affected by these gaps are not large in absolute terms but are loyal in their consumption patterns. Whether they migrate to other services or whether they reduce their overall streaming consumption is one of the open questions of the next several years.

The platform side

The platform side of the streaming ecosystem — the services that aggregate other services rather than producing their own content — has benefited from the mid-tier consolidation. The aggregators provide the discovery and bundling functions that the consolidated services have, in their own product strategies, not yet figured out how to provide adequately.

What is next

The next phase of the consolidation will, on most plausible scenarios, focus on the integration of the surviving mid-tier services into adjacent operations. Whether the surviving services maintain independent operations or whether they continue to consolidate into the largest services is the question that the next several years will answer.