Welcome to Lowpass! This week: Streaming media is killing things, and Sandbox VR is killing … it?

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When streaming first started to surge some years before the pandemic, there was a lot of talk about an eventual tipping point – the moment services like Netflix and Amazon Prime would eventually overtake pay TV and other established money makers of the entertainment biz.

Now, that tipping point has come and passed. Streaming has become the most popular way of watching TV, thanks not only to paid subscription services, but also free services like Tubi, FAST channels as a replacement of basic cable, and a growing number of companies embracing all of the above.

But as consumers pushed the entertainment industry past this tipping point, it now has to contend with rapid declines of its legacy businesses. That includes pay TV, which is in a world of hurt, but also other offerings that once seemed like they could help bring existing paradigms to a digital future. For this week’s Lowpass, I decided to take a look at streaming’s body count.

Cord cutting is only getting worse. There’s some new numbers about the US pay TV industry out this week, and they don’t look good: Cable, satellite and internet TV services lost a combined 1.62 million subscribers in Q2 of 2024, according to estimates from MoffetNathanson (via LightReading). At first glance, that’s slightly better than last year’s losses.

However, if you zoom out a little bit, things go from bad to worse: Over the first six months of this year, the industry lost a whopping 4 million subscribers. What’s more, traditional pay TV operators (cable, satellite, telcos) have seen double-digit subscriber declines for ten consecutive quarters now. And with Disney feuding with DirecTV, losses are only predicted to get worse in the second half of the year.

DVDs are going extinct. Yes, I am really going to talk about DVDs. In 2024. But hear me out: While most of us may have moved on from physical media a long time ago, bits on discs have still been a way for millions of people to get access to movies and shows. Now, that chapter is quickly coming to a close.

Digital downloads are looking less and less appealing. Speaking of Redbox: When the DVD kiosk company went under, it also delivered another blow to the idea of digital ownership. Customers found that they couldn’t log into the company’s mobile apps anymore; Redbox’s TV apps have been disappearing from devices as well, leaving consumers unable to access the digital movies and TV shows they had bought from the company.

Digital lockers were supposed to alleviate those concerns by allowing consumers to transfer their content from one service to another. More than a decade after the launch of the first such service, the reality is a lot more sobering. UltraViolet, which was backed by most major Hollywood studios, shut down in 2019. 

TV Everywhere is dead. Another long-championed entitlement program meant to keep consumers tied to existing business models is disintegrating before our eyes: Last week, Disney announced that it will shut down its TV Everywhere apps later this month. This comes after Paramount shuttered its own TV Everywhere apps earlier this year.

Disney & Co. are encouraging their customers to subscribe to their respective streaming apps instead. It’s fair to assume that Disney+ and Paramount+ already had many more active users than the company’s respective TV Everywhere apps, so the move could just be seen as logical cost cutting.

However, I’d argue it’s a much bigger deal: Disney CEO Bob Iger may insist that he is still committed to the company’s TV networks, but Disney’s actions do speak louder than words: By dramatically reducing the spending for its networks earlier this year, and now cutting off streaming access for legacy TV subscribers, Disney is effectively signaling that traditional television is a thing of the past.

There’s a common thread here. The death of the DVD, the end of TV Everywhere, ever-accelerating cord cutting and lackluster support for digital downloads may seem like four very different things.

Or maybe they’re all part of the same story. When Hollywood first embarked on the transition to digital entertainment, it tried to salvage as many parts of its existing business as possible. Physical products and pay TV bundles were effectively two sides of the same coin: Both were part of a business model in which studios didn’t have direct commercial relationships with consumers, but instead relied on middlemen to resell their movies and shows.

Streaming, or direct-to-consumer, as studios like to call it in their earnings calls, effectively broke that model. And with those middlemen increasingly irrelevant, there’s little need to keep supporting the apps, services and products that used to be core to Hollywood’s business.

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Location-based virtual reality startup Sandbox VR is aiming for some ambitious growth targets: The company plans to open 280 new locations over the next four years. To do so, Sandbox is leaning more heavily into franchising. Sandbox recently opened its 50th location, a VR center in Australia, with the help of a local franchisee.

Sandbox and Zhao have also been releasing a bunch of new data about the startup’s business:

• Sandbox sold 1.2M tickets in 2023. Ticket sales have been up 33% year-over-year in 2024.
• The company surpassed 3 million cumulative ticket sales across all of its locations last month.
• The average ticket price in the US is currently $53, and each booking (group of friends or family members that come in together) averages around $180, according to Zhao.
• Sandbox’s 37 owned-and-operated locations bring in $1.9 million annually on average.
• Sandbox’s UK and Ireland franchise partners have generated more than $10 million in revenue since opening their first store in July of 2022.
• The London Sandbox VR franchise location is projected to top $5 million in revenue this year, but that’s not all due to VR experiences: It also has a robotic bartender, which brings in $300,000 per year, according to Zhao.

This is quite a turn of fate for Sandbox, which was hit hard by the pandemic. The startup had to file for bankruptcy in the summer of 2020 after global lockdowns brought its revenue to a halt, but reemerged months later to what Zhao described as “pent-up demand.”

Sandbox has built eight experiences in-house to date, and Zhao said that he would eventually like to offer new content even more frequently to give consumers a reason to come back. Growing the number of locations, and the company’s overall business, is key to that goal.

“The more locations we have, the more we can iterate on our content,” Zhao said.  “In a way, we‘re trying to build the new movies.”

News for humans, by humans.

Twitter, I mean X, has a TV app now. And it’s … not great?

A review of Pico’s new VR headset. “Many of the technical advantages of the Pico 4 Ultra over Meta’s competitor are only on paper and have little effect in practice.” Ouch!

Roku is finally getting ambient art. The “Backdrops” feature had first been announced in April.

The Internet Archive lost its ebook lending appeal. An appeals court found that the non-profit cannot lend out ebooks without striking deals with publishers.

YouTube wants to protect creators from AI. The video site will enhance its Content ID system to also detect AI content that simulates someone’s singing voice. Which makes me wonder: How long before creators will be able to monetize third-party videos that feature their AI-generated likeness with the help of Content ID?

Leaked Disney data shows Disney+ is a cash cow. Hackers leaked some of Disney’s internal Slack data earlier this summer. The Wall Street Journal combed through it, and discovered that Disney+ apparently is responsible for 43% of the company’s streaming business.

Play for Dream now has a Kickstarter. The Android-based mixed reality headset that looks a lot like … some other headset … costs $1199.

Thanks for reading, have a great weekend!