š¬ Streamingās Loyalty Battle
The rise of the 'serial pauser'
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The āSerial Pauserā Dilemma
Churnāthe cycle of gaining and losing subscribersāis a critical challenge in the Subscription Video On Demand (SVOD) industry. A recent report from Antenna revealed that a third of canceled users resubscribe within six months, creating a new breed of āserial pausers.ā This behavior highlights the uphill battle platforms face in retaining subscribers, particularly those relying on live sports (like Paramount+) and the occasional blockbuster show (like Max). As the fight for loyalty evolves, one truth stands out: there is Netflixāand then there is everyone else.
Today at a glance:
Trends and Market Share.
Disney: DTC Profits Rise
Comcast: Cable Restructuring
Warner: Box Office Woes
Paramount: Streaming Growth
For a glossary on SVOD, AVOD, OTT, DTC, and more, revisit our Industry Showdown article for an extensive market overview.
1. Trends and Market Share
The chart below shows the paid subscriber trends in the past four years.
š” Reminder: Some platforms, like YouTube Premium, Amazon Prime, and Apple TV+, donāt share quarterly numbers. Disney+ Hotstar is excluded for now due to its planned merger with Reliance in 2025.
The shift from linear TV to streaming has been a high tide lifting all boats. According to Nielsen, streaming accounted for 41% of US TV Time in September 2024, representing a 3.5-point increase year-over-year, eating away at Cable.
Key trends to watch:
š Password-sharing crackdown: Following Netflixās success with paid sharing, Disney launched the initiative in the US at the end of September. The impact will show in Q4 and beyond. Max will also start paid sharing soon.
šŗ Amazon Prime Video is bigger than you think: CEO Andy Jassy shared earlier this year that the service has over 200 million monthly viewers globally. With a unique mix of exclusive shows, live sports, and a seamless integration with e-commerce, Amazon may leverage its ecosystem advantage to challenge Netflix.
ā¶ļø YouTube remains the living room king: The platform accounts for over a quarter of US TV streaming time (excluding YouTube TV) and is still gaining share. Alphabet recently revealed YouTube ads and subscriptions generated over $50 billion in revenue in the past 12 months (compared to $38 billion for Netflix).
šØāš©āš§āš¦ Subscriber trends: Pillar content like the Olympics for Peacock or House of the Dragon for Max boosted sign-ups. However, questions remain about retention for every service not named Netflix.
2. Disney: DTC Profits Rise
Disney ends its fiscal year in September, so the June quarter was Q3 FY24.
š¬ Streaming Gains: Disney's direct-to-consumer (DTC) segment, including Disney+, Hulu, and ESPN+, posted a second consecutive profitable quarter with $321 million in operating income. Core Disney+ subscribers grew to 123 million, up 4.4 million, driven by strong uptake of ad-supported tiers.
šæ Blockbuster Success: The Studio division achieved $316 million in profit, fueled by box office smashes Inside Out 2 and Deadpool & Wolverine. Disney became the first studio to surpass $4 billion in global box office revenue in 2024.
š° Parks and Experiences Challenges: Operating income for the Parks, Experiences, and Products segment declined 6% to $1.7 billion, impacted by rising costs, hurricanes, and competition from the Paris Olympics. Domestic attendance remained steady, while international parks faced softness.
šŗ Linear TV Decline: Revenue for traditional TV networks dropped 6%, with profits falling 38% to $498 million, as cord-cutting and reduced ad sales weighed on performance. Disney remains committed to integrating linear and streaming rather than divesting assets.
š® Future Optimism: Disney forecasts high-single-digit earnings growth for FY25 and double-digit growth for FY26 and FY27. Upcoming releases like Moana 2 and Mufasa: The Lion King are expected to sustain momentum alongside expanded features like the ESPN tile on Disney+.
What to make of all this?
Disneyās Q4 showcased continued progress in its streaming turnaround, supported by blockbuster box office results. However, challenges in the Linear TV segments highlight the complexities of navigating a transitional media landscape. With a strong content pipeline and a focus on profitability, Disney appears well-positioned to rebound under Bob Igerās leadership through 2026.
3. Comcast: Cable Restructuring
šļø Olympics Boost: The Paris Summer Olympics drove NBCUniversalās revenue up nearly 37%, generating a record $1.2 billion in advertising and adding 3 million subscribers to Peacock, which now has 36 million paid subscribers
š Streaming Gains: Peacock revenue surged 82% year-over-year to $1.5 billion. Losses narrowed to $436 million from $565 million last year, signaling progress in its transition to profitability.
š Cable Challenges: Comcast lost 365,000 cable TV subscribers as cord-cutting accelerated. Revenue from its video segment fell 6.2%, prompting the company to explore a potential spinoff of its cable networks, including Bravo and CNBC, to focus on growth areas.
š¢ Theme Parks Cool: Theme parks revenue dipped 5% to $2.3 billion due to lower attendance, reflecting a post-COVID normalization in domestic park activity.
š» Broadband Mixed Bag: Broadband lost 87,000 net customers, partly due to the end of a government subsidy program. However, revenue increased 3%, with average revenue per user climbing 4%.
What to make of all this?
Comcast's Q3 highlights the duality of its challenges and opportunities. The Olympics showcased the strength of its media and streaming assets, but struggles in legacy businesses like cable TV and theme parks remain evident. The proposed cable networks spinoff could help streamline its focus, but the road ahead will test Comcastās ability to sustain momentum in Peacock and broadband amid fierce competition.
4. Warner: Box Office Woes
š Streaming Surge: Max added a record 7.2 million subscribers, reaching 110.5 million globally, driven by the international rollout and hits like House of the Dragon. The streaming segment posted a 9% revenue increase, contributing to Warner's first quarterly profit since 2022.
š Box Office Dive: Studio revenue fell 17% year-over-year, with theatrical revenue plummeting 40% due to a weaker film slate (Beetlejuice Beetlejuice and Twisters vs. last yearās Barbie). Video game revenue also dropped 31%, affected by tough comparisons.
šŗ Mixed Network Results: Network revenue grew 3%, thanks to the Olympics broadcast in Europe and Shark Week, but advertising sales declined 13% amid cord-cutting challenges. The $9.1 billion NBA-related impairment from Q2 still looms over the segment.
š Debt and Cost Pressures: Free cash flow fell 69% to $632 million, and Warner is grappling with $41 billion in debt. However, a renewed deal with Charter Communications signals strategic partnerships to stabilize the business.
š® CEO Optimism: David Zaslav emphasized Maxās strong momentum and reaffirmed confidence in achieving $1 billion streaming profits by 2025, hinting at password-sharing crackdowns to drive additional revenue.
What to make of all this?
Warner Bros. Discoveryās Q3 showcased significant streaming growth and its first profit in years, but its reliance on Max contrasts sharply with struggles in film and traditional TV. The path forward hinges on streaming profitability, international expansion, and adapting to cord-cutting pressures. With a heavy debt load and declining cash flow, can Warner find its path to financial stability?
5. Paramount: Streaming Growth
šŗ Streaming Success: Paramount+ added 3.5 million subscribers, driven by sports like NFL and UEFA and original programming such as Tulsa Kings, reaching 72 million subscribers. The streaming segment posted its second consecutive profitable quarter with $49 million in operating income.
š TV and Film Struggles: Revenue in Paramount's TV segment declined 6%, impacted by lower advertising revenue and declining cable subscribers. The film division's revenue plunged 34%, with theatrical revenue dropping 71% due to a weaker slate than last year (Mission: Impossible - Dead Reckoning in Q3 2023).
š¤ Merger Progress: The Skydance Media merger remains on track to close in the first half of 2025, marking a critical step in Paramountās restructuring. The deal comes after Paramount explored 12 alternative bidders.
āļø Cost Reductions: Paramount continues its $500 million cost-cutting initiative, having completed 90% of its planned reductions. The initiative has resulted in layoffs and asset write-downs.
š Strategic Shift: Paramount seeks a joint-venture partner for streaming to compete with Netflix and Disney, while continuing to manage the decline of its legacy cable TV networks.
What to make of all this?
Paramount's streaming business shows promising growth, with sustained profitability and subscriber additions, but challenges persist in TV and film. The Skydance merger offers potential for transformation, though achieving stability in its traditional media businesses remains a significant hurdle.
Other market participants:
Amazon Prime Video is part of the broader Amazon Prime subscription. We cover Prime Video in our Amazon coverage here.
We discussed Apple and Roku for PRO members here.
Thatās it for today.
Stay healthy and invest on!
Disclosure: Iām long AAPL, AMZN, GOOG, NFLX, and ROKU in the App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here šš¼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
Very good