Technology and media (1 of 8)

Media and entertainment

About 8 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Media companies make or buy films, shows, music, games and sport, then earn from them through subscriptions, advertising, sales and licences.

The big idea: Content costs a lot upfront and almost nothing to show to one more person, so scale decides who wins: the same series or game is far cheaper per viewer across 300 million subscribers than across 3 million. That is why the industry keeps consolidating, and why a subscriber is worth the margin they bring times how long they stay.

One unit, in numbers: One subscriber of a large global video streaming service for one year: USD 140 comes in, and USD 44 (31%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 10 to 15 percent operating margin for listed media groups; scale leaders near 30 percent, while many smaller streamers lose moneyRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: MediumA fair amount of money is tied up, in things like stores, stock or equipment. More on capital intensity
The number to watch: Paid subscribers and net additionsHow many people pay, and new subscribers minus those who left. Companies count them differently, so compare with care.

Ask this first in a case

How does the client make money: subscriptions, advertising, transactions, licensing, or a mix?

The industry's other words are explained in Words to know (11).

On this page (17 sections)

How money is made

Subscriptions: subscribers times ARPU (average revenue per user), as in video and music streaming, pay TV and game passes.
Advertising: impressions divided by 1,000 times CPM (the price of 1,000 ad views), as in free TV, social media and cheaper streaming plans with ads.
Transactions: people pay per item, such as cinema tickets, game purchases, in-game items and pay-per-view sport.
Licensing: other companies pay to show a film, series or sport in a country for a period.
Live events, merchandise and theme parks built on popular characters and stars.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One subscriber of a large global video streaming service for one year. Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Subscription fees plus a share of ad income (about USD 11.70 a month)	USD 140	100%
Minus Content amortization: films, series and sport spread over their useful life (about 40 percent)	USD 56	40%
Minus Marketing to win and keep subscribers (about 9 percent)	USD 12	8.6%
Minus Technology and streaming delivery (about 9 percent)	USD 12	8.6%
Minus General and administrative costs (about 6 percent)	USD 8	5.7%
Minus App store, telecom partner and payment fees (about 6 percent)	USD 8	5.7%
What is left (contribution)	USD 44	31%

Check: USD 140 minus USD 96 of costs leaves USD 44.

So what: The service keeps about USD 44 a year from each subscriber, about 31 percent, close to the leader's 2025 operating margin. Almost all of the content cost is fixed, so spreading it over more subscribers, and keeping them longer (lower churn), moves profit most; a smaller rival paying for similar content with a tenth of the subscribers would lose money.

Key measures(9)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Paid subscribers and net additions
How many people pay, and new subscribers minus those who left. Companies count them differently, so compare with care.
Typical: Netflix passed 325 million paid memberships in late 2025[1]
ARPU (average revenue per user)
Revenue divided by the average number of users or subscribers in a period, usually per month. Glossary: ARPU (average revenue per user)
Churn
The share of subscribers who cancel in a period, usually per month. Average lifetime in months is about 1 divided by monthly churn. Glossary: Churn
Typical: About 4.6 percent a month on average for US premium video streaming services in 2025[4]
LTV to CAC
Lifetime value of a subscriber (monthly margin times months stayed) divided by the cost to win them.
Engagement
Hours watched, listened or played per user; daily and monthly active users (DAU and MAU).
Typical: Spotify had about 751 million monthly active users and 290 million paying subscribers at the end of 2025[3]
CPM (cost per mille)
The price an advertiser pays for 1,000 ad impressions. Glossary: CPM (cost per mille)
Fill rate
The share of available ad slots actually sold. Glossary: Fill rate
Payer conversion and ARPPU (games)
The share of players who spend money, and the average revenue per paying user.
Content cash spend against amortization
Cash paid for content this year compared with the content cost counted in the profit and loss account (P&L). A big gap means profit looks better than cash.
Typical: Netflix amortized about USD 16.4 billion of content in 2025[1]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

How does the client make money: subscriptions, advertising, transactions, licensing, or a mix?
How many people pay or watch, how is that trending, and how is a subscriber counted?
What is churn, and what makes people leave: price, content gaps, the end of a sports season?
What does the content cost per subscriber compared with rivals, and does the client own it or rent it?
What do cash flows look like against reported profit, given upfront content spending?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Create
Margin varies
Studios, game developers, musicians, independent creators, sports leagues and newsrooms
Hits driven: a few successes pay for many failures.
Step 2: Own and package the rights
Fat margin
Studios, labels, music publishers, sports leagues and broadcasters, by country and by time window
Owners of must-have content, such as top sport or hit catalogues, can charge a lot for it.
Step 3: Aggregate and distribute
Margin varies
Streaming services (Netflix, Disney+, JioHotstar), TV networks, music apps (Spotify), game publishers, social and video platforms (YouTube)
Leaders at scale earn well; smaller services often lose money.
Step 4: Gatekeepers and delivery
Medium margin
App stores, game consoles, pay-TV and telecom bundles, smart TV makers, cinemas, content delivery networks
App stores and consoles take a fee on purchases made through them.
Step 5: Sell the audience to advertisers
Medium margin
Ad sales teams, advertising agencies and ad technology platforms
Step 6: Extend the brand
Margin varies
Merchandise, theme parks, live events and licensing partners

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Profit collects at the two ends that are hard to copy: owners of must-have content (top sport, hit catalogues, franchises) and platforms with huge audiences that advertisers must reach. The middle, a mid-sized service paying for content it does not own, is squeezed, which is why so many deals of 2024 to 2026 were about buying scale.

Cost structure(6)

The main costs, each as a share of revenue (the money from sales).

Content amortization (scaled video streamer): About 35 to 60 percent of revenue; Netflix was about 36 percent in 2025[1]
Marketing: 8 to 12 percent, higher during launches and in new countries
Technology and delivery: 5 to 10 percent
Partner and payment fees: app stores, telecom and TV partners, cards: 3 to 8 percent
General and administrative: 4 to 8 percent
Music streaming: cost of revenue, mostly royalties to labels and publishers: About two thirds of revenue (Spotify gross margin about 32 percent in 2025)[3]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Netflix operating margin: About 29.5 percent in 2025, target about 31.5 percent in 2026[1]The scale leader; most streamers earn far less or lose money.
Netflix revenue and free cash flow, 2025: About USD 45.2 billion revenue and USD 9.5 billion free cash flow[1]
Spotify, 2025: Gross margin about 32 percent, operating margin about 13 percent[3]
Operating margin before tax, US-listed companies: Entertainment about 11 percent; broadcasting about 12 percent; entertainment software (games) about 34 percent[5]
Global games market, 2025: About USD 197 billion, of which mobile about USD 108 billion (Newzoo)[6]
Global advertising revenue, 2026 forecast: About USD 1.3 trillion, up about 8.9 percent (excluding US political advertising)[7]

Typical cases(7)

Case prompts you might hear in this industry.

Our client is a streaming service in Southeast Asia that is losing money. How can it become profitable?
Should a streamer launch a cheaper plan with ads?
A broadcaster is thinking of bidding for cricket rights in India. How much should it bid?
Two film studios want to merge. Should they?
How can we grow the revenue of a free-to-play mobile game?
Estimate the size of the online video advertising market in the Middle East.
Our music streaming client wants to raise prices. What will happen to subscribers and profit?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Comparing subscriber numbers across companies that count them differently (bundles, free trials, telecom partner subscriptions).
Treating content spend as a one-year cost. It is amortized over several years, so profit and cash can differ a lot.
Ignoring churn after a sports season or a hit series ends.
Assuming every ad slot is sold at the full CPM; check the fill rate.
Forgetting that app stores and platforms take a fee on in-app purchases and subscriptions sold through them.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Streaming turned toward profit and advertising. Netflix grew revenue about 16 percent in 2025 to about USD 45.2 billion, grew ad revenue more than two and a half times to over USD 1.5 billion, and expects ad revenue to roughly double again in 2026. It stopped reporting subscriber numbers every quarter from 2025.[1]
US streaming growth slowed while churn held steady: premium video subscriptions grew about 7 percent in 2025, down from 12 percent in 2024, with average monthly churn at about 4.6 percent.[4]
Consolidation. Paramount agreed in February 2026 to buy Warner Bros. Discovery, said in August that it had clearances in nearly 70 countries, and settled a lawsuit from 12 US states in September 2026. The deal had not closed by the end of September 2026, so check its status before using it.[9]
Regional giants formed: JioStar combined Viacom18 and Star India in November 2024 and launched JioHotstar in 2025, and Canal+ completed its takeover of MultiChoice in Africa in September 2025.[10]
Gulf money moved into games: Electronic Arts was taken private by Saudi Arabia's Public Investment Fund, Silver Lake and Affinity Partners in August 2026, at an enterprise value of about USD 55 billion.[12]
Advertising kept growing, led by digital platforms: WPP Media expects global advertising revenue to grow about 8.9 percent in 2026 to about USD 1.3 trillion.[7]

Players by region(6)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Netflix
YouTube (Alphabet)
Disney
Amazon Prime Video
Spotify
Tencent, games and music
Sony, games, music and film
Universal Music Group
Europe: Spotify (Sweden)
Canal+ (France), owner of MultiChoice
Sky (owned by Comcast)
RTL Group (Luxembourg)
ProSiebenSat.1 (Germany)
Ubisoft, games (France)
Middle East: MBC Group and its Shahid streaming service (Saudi Arabia)
OSN+ (UAE)
Anghami, music streaming (majority owned by OSN since 2024)
Savvy Games Group, owned by the Public Investment Fund (Saudi Arabia)
India: JioStar and JioHotstar
Zee Entertainment
Culver Max Entertainment (Sony's TV business in India, formerly Sony Pictures Networks India)
Netflix
Amazon Prime Video
Southeast Asia: Garena, games (Sea Limited, Singapore)
Vidio, streaming (Indonesia)
Viu, streaming
Netflix
YouTube
United States: Disney
Comcast (NBCUniversal)
Paramount Skydance, buying Warner Bros. Discovery
Netflix
Electronic Arts
Microsoft (Xbox)

Words to know(11)

Linked words have a fuller entry in the glossary.

SVOD and AVOD (glossary entry): Subscription video on demand (viewers pay) and advertising-funded video on demand (advertisers pay).
ARPU (glossary entry): Average revenue per user: revenue divided by average users in a period.
Churn (glossary entry): The share of subscribers who cancel in a period.
LTV (lifetime value) (glossary entry): The margin a subscriber brings over the whole time they stay.
CAC (customer acquisition cost) (glossary entry): Marketing and sales spending divided by the number of new subscribers won.
CPM (glossary entry): Cost per mille: the price for 1,000 ad impressions.
Fill rate (glossary entry): The share of available ad slots that are sold.
Content amortization (glossary entry): Spreading the cost of a film, series or sport over the years it is expected to be watched.
Windowing: Releasing content in stages (cinema, then streaming, then free TV) to earn from each.
DAU and MAU: Daily and monthly active users.
ARPPU and payer conversion: Average revenue per paying user, and the share of players who pay.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(12)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

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Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.