If the last five years have been about following Netflix’s path of over-the-top for subscribers, this year has begun to influence in this direction for its rivals. While increasing subscribers is still important, now the likes of Disney, Warner Bros. Discovery, Paramount and NBCUniversal find themselves envious of something Netflix has in spades: Ongoing profits.
Like Gollum and the One Ring to Rule Them All, or Thanos and the Infinity Stones, profit has become the ultimate MacGuffin of the entertainment industry, always seemingly out of reach. Netflix now finds itself at the top of the subscription pile, ending 2022 with 231 million paid subscribers and $5.6 billion in profits. Next quarter the company is projecting $1.6 billion in profit, and for 2023, it expects an operating profit of 21 to 22 percent, up from 18 to 20 percent in 2022.
Other businesses, meanwhile, are looking to 2024. That’s when Disney, NBCU, Paramount and WBD all say they expect — or at least hope — to be profitable in their streaming businesses. But even among those legacy entertainment players, not every company finds itself in the same situation. Nowhere is that more evident than at WBD, headed by David Zaslav, which has been on the receiving end of criticism from Hollywood as it took in nearly $3.5 billion in written content, including some of its completed projects. should.
Part of Zaslav’s strategy has been licensing to Warners’ studio. Ahead of Amazon’s release Rings of Power series last year, the tech giant signed a deal with WBD to license Peter Jackson’s original, and Hobbit movies, making them available on the Prime Video platform. WBD CFO Gunnar Wiedenfels said at a Bank of America conference last September, “We have a lot of content sitting around for no reason. “It’s a window without customization. [and] we look at it as something we leave behind and the additional revenue we generate.”
Those efforts, however, now seem to be valid, with nearly every player in the space making similar adjustments. “Obviously the worst is post-WBD after a challenging consolidation period,” Wells Fargo analyst Steven Cahall wrote in a post-earnings take.
Executives at WBD, led by CFO Wiedenfels, indicated in their earnings call on February 23 that the DTC division will be on hiatus even this quarter, before the HBO Max/Discovery+ streaming launch ( which will be revealed April 12) probably needs more sales. and technology investment for the next quarter. Cowen analyst Doug Creutz wrote a day later that profits at its DTC business were “improving faster than we expected.”
Other companies investing in streaming are not so lucky. At both Paramount, led by Bob Bakish, and NBCU, led by Jeff Shell, losses in the last quarter widened to $978 million and $575 million, respectively. Executives at both companies said they expect streaming losses to be large this year (Peacock is expected to lose $3 billion in 2023).
At Bob Iger’s Disney, things are going well, but the losses continue, with Disney losing $1.1 billion in its direct-to-consumer division last quarter. This is more than expected, and is down from 1.5 billion dollars in the previous quarter, but it is a deep hole that the company needs to climb to be profitable in 2024. Indeed, MoffettNathanson analyst Michael Nathanson argued after Disney’s last call for income. that “for us, the investment case for Disney is all about the potential income for the year 2025,” when he thinks Disney can deliver 2 billion dollars in profits.
But before she can do that, she needs to continue to reduce those losses. WBD, Disney and Paramount are all telling investors that their plans include cutting spending but leaning into franchises (like WBD’s). The Lord of the Rings). This will see content investment level off or decline, and with more spending towards marquee properties and IP, potentially leaving important original ideas off the table.
At Comcast, Wells Fargo’s Cahall He wrote in January that “we have no doubt that Peacock’s $3 billion loss will be greater, but the media’s earning power may never return to ’21’s $4.6 billion.” In short, streaming will not return NBCU to the joys of cable TV.
Meanwhile, Paramount also recently merged Showtime with Paramount+, significantly reducing the cost, and focusing on the franchise. use franchises like them. Billions Same to you Dexter. “We expect to return the company to profitable growth in 2024,” CEO Bakish said on the Feb. 16 earnings call.
But when it comes to taking on the streaming giants in search of Netflix-like subscribers and hanging around, WBD appears to have positioned itself as a stick. While the integration of the service will bring some investment (JPMorgan’s Phil Cusick estimates that the company will invest $ 400 million in the launch through marketing and technology), reduce the cost of the surprise, increase the price that the new launch has put it in somewhere where he was. may be the first of the legacy streamers to create a way to make a profit. Whether it’s a good idea to replace an ATM that binds to cable TV is another story.
In Q4 of 2022, Netflix was only able to profit from streaming.
Source: Company report
A version of this story first appeared in the March 1 issue of The Hollywood Reporter. Click here to register.
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