🎬 Tariff Trouble in Hollywood
Studios brace for new policy as box office struggles
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In case you missed it:
The US box office is still 28% below its 2018 peak.
Q1 2025 was the worst start to the year since 1996 (excluding COVID), though hits like A Minecraft Movie, Sinners, and Marvel’s Thunderbolts are fueling a much-needed rebound in Q2.
Direct-to-consumer (DTC) streaming has redefined success. Instead of box office sales, engagement metrics now take center stage. Platforms like Netflix drop content overnight, leveraging their reach to pull in millions of eyeballs.
Streaming platforms are going global, with Korean dramas and Spanish horror finding new audiences — genres that might have been overlooked in the theater-first era.
Tariffs on movies?
President Trump just announced plans for a 100% tariff on movies produced outside the US, calling America’s movie industry "a very fast death." According to FilmLA, movie and TV production in Los Angeles has fallen by nearly 40% over the last decade. With tax incentives drawing filmmakers away, the impact could ripple across Hollywood.
It’s too soon to know if the tariff will go through or how it might work, but it’s safe to say studios are watching their bottom line closely. It could impact blockbuster movies in the works like Avengers: Doomsday or Mission: Impossible — The Final Reckoning. The lack of clarity could slow down production or halt it in some cases.
What happens next could reshape Hollywood — or freeze it in its tracks.
Today at a glance:
📈 Streaming subscriber trends
🏰 Disney: Streaming & Parks Shine
🦚 Comcast: Broadband Weakness
🎥 Warner: Streaming Drives Gains
⛰️ Paramount: Merger Momentum
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📈 Streaming subscriber trends
Netflix capped 2024 with 302 million members — but in Q1, it stopped sharing membership numbers, leaving us to focus on the “best of the rest.”
So, let’s zoom in on the streaming platforms still sharing their numbers.
Note: Disney+ Hotstar (India) is excluded after its merger with Reliance. Platforms like YouTube Premium, Prime Video, and Apple TV+ don’t share subscriber numbers quarterly — if at all.
Now, let’s break down how the biggest players performed this quarter.
🏰 Disney: Streaming & Parks Shine
Disney’s fiscal year ends in September, so the March quarter was Q2 FY25.
📈 Streaming’s profits rise: Disney’s direct-to-consumer segment, which includes Disney+ and Hulu, delivered its fourth consecutive profitable quarter with $336 million in operating income — a substantial rise from $47 million a year ago. Despite price increases, Disney+ gained 1.4 million subscribers, reaching 126 million, while Hulu added 1.1 million, reaching 55 million.
🏰 Parks expansion gains traction: Operating income for the Experiences division climbed 9% to $2.5 billion, driven by domestic parks and cruise performance. However, international parks, particularly in Shanghai and Hong Kong, struggled with a 23% drop in operating income due to higher costs and lower attendance. Disney announced plans for a $30 billion domestic park investment and a new Abu Dhabi resort.
📺 Linear TV stabilizes amid cost cuts: Revenue from Disney’s traditional TV networks declined 13% to $2.4 billion while operating income rose 2% to $0.8 billion. ESPN’s domestic revenue increased 5%, but higher programming costs pressured segment margins. Disney plans to launch an ESPN DTC product this year, allowing cable subscribers to access the streaming version without additional fees.
🍿 Content Sales rebound: Content sales and licensing swung to a $153 million operating profit from an $18 million loss last year, as Moana 2 and Mufasa: The Lion King continued to perform well in theaters and on streaming. Weaker releases like Snow White and Captain America: Brave New World weighed on box office results, tempering the overall rebound.
🔮 Updated guidance: Disney raised its FY25 adjusted EPS guidance to $5.75, up from $5.30, driven by streaming profitability and anticipated gains in entertainment and sports. Management forecasts double-digit operating income growth in these segments, alongside 6-8% gains in the Experiences division.
What to make of all this?
Disney’s Q2 showed solid execution across streaming and parks, with strategic expansions setting up the entertainment giant for future growth. However, macro headwinds, international park challenges, and rising content costs could weigh on profitability.
🦚 Comcast: Broadband Weakness Persists
📉 Subscriber losses deepen: Comcast lost 199,000 broadband customers in Q1, surpassing the anticipated 146,000 losses, as competition from fiber and wireless intensified. Video customer losses also exceeded estimates, with 427,000 cancellations. Despite this, broadband revenue remained stable, driven by a 3.3% increase in ARPU.
📈 Peacock surges ahead: Peacock added 7 million subscribers, reaching 41 million, aided by a promotional deal with Charter Communications. Peacock’s revenue rose 16% to $1.2 billion, while operating losses narrowed to $215 million, outperforming expectations. However, Peacock’s subscriber gains may face headwinds as the promotional deal winds down.
🎥 Studios maintain momentum: Universal Studios delivered a 3% revenue increase to $2.8 billion, driven by strong performances from Wicked and Nosferatu. Yet, lower theatrical revenue and video game delays partially offset these gains, tempering the segment’s overall momentum.
🎢 Epic Universe gears up for launch: Theme parks revenue fell 5% to $1.9 billion, impacted by wildfire disruptions in Los Angeles and pre-opening expenses for Epic Universe, set to open on May 22, 2025. Management emphasized strong pre-bookings and long-term park growth as key levers for future profitability.
📺 Cable networks spinoff advances: Comcast plans to spin off its traditional cable TV networks by year-end, including MSNBC, CNBC, and USA Network. The move is intended to streamline operations and focus on broadband, streaming, and wireless. Management emphasized the importance of long-term content rights, including its recent NBA deal.
🔮 Updated guidance: Comcast doubled down on its broadband and wireless networks, rolling out a new five-year pricing guarantee to drive customer retention and fend off competition. Management anticipates continued challenges in broadband and video, but expressed confidence in growth opportunities for Peacock, theme parks, and wireless.
What to make of all this?
Comcast’s Q1 results were mixed. Peacock’s subscriber surge and studio gains were offset by broadband losses and ongoing video declines. With Epic Universe on the horizon and the cable spinoff underway, the focus now shifts to execution.
🎥 Warner: Streaming Drives Gains
📈 Streaming expansion continues: Max and Discovery+ added 5 million subscribers in Q1, bringing the total to 122 million globally. Local language content, including local sports, has contributed to the 22 million subs added in the past year (albeit at a declining ARPU). Streaming revenue rose 8% to $2.7 billion, while adjusted operating income increased to $339 million, up from $86 million a year ago. CEO David Zaslav reiterated Warner’s target of $1.3 billion in streaming EBITDA for 2025 and 150 million subscribers by 2026.
🎥 Studio slump: Studio revenue dropped 18% to $2.3 billion, hurt by a weaker theatrical slate compared to last year’s hits like Dune: Part Two and Godzilla x Kong. Video game revenue fell 48%, as Warner released no major titles this quarter. Management is counting on upcoming releases like Minecraft Movie and Sinners to lift the studio’s performance in Q2.
📺 Linear TV struggles: Traditional TV revenue slid 7% to $4.8 billion, with ad sales down 12% amid declining viewership and lower international affiliate rates. Warner plans to restructure its linear TV division and may spin it off to focus on higher-margin streaming and content production.
💵 Debt reduction: Warner paid down $2.2 billion in debt, reducing its total debt load to $38 billion. Free cash flow was $302 million, down 23% Y/Y, as the company ramped up spending on content and international expansion. With global rollout plans in motion, Warner is prioritizing debt reduction while navigating higher costs.
🔮 Updated guidance: Warner reiterated plans to launch Max in key international markets like the UK, Germany, and Italy by early 2026. Password-sharing measures are set to roll out globally in late 2025, expected to drive incremental revenue growth.
What to make of all this?
Warner Bros. Discovery’s Q1 highlighted strong streaming momentum. Yet, steep declines in studio and linear TV revenue underscore structural challenges. With ambitious streaming targets and international expansion plans, Warner is focusing on content quality and cost controls to navigate a tough media landscape.
⛰️ Paramount: Merger Momentum
📈 Streaming growth continues: Paramount+ added 1.5 million subscribers in Q1, bringing the total to 79 million globally. Streaming revenue rose 9% to $2 billion, driven by a 16% jump in subscription revenue. Operating losses narrowed to $109 million, a significant improvement from the $286 million loss a year ago. Paramount reiterated plans to reach domestic streaming profitability by the end of 2025.
🎥 Film Division steadies: Filmed entertainment revenue increased 4% to $627 million, bolstered by carryover hits like Sonic the Hedgehog 3 and the Q1 release of Novocaine. However, theatrical revenue fell 3% Y/Y with tough comps. Management expects stronger results in Q2 as new releases gain traction.
📉 TV Media declines: Television media revenue dropped 13% to $4.5 billion, largely due to the absence of the Super Bowl broadcast that CBS carried last year. Ad revenue fell 21% but was flat excluding the Super Bowl impact. Affiliate and subscription revenue declined 9% amid lower linear TV rates.
🤝 Skydance merger on track: Paramount expects the Skydance Media merger to close in H1 2025, pending regulatory review by the FCC. CEO David Ellison is set to lead the merged entity, with Paramount eyeing cost synergies and expanded content production capabilities. Meanwhile, Paramount faces ongoing scrutiny from a $20 billion lawsuit filed by President Trump against CBS News.
💵 Restructuring pays off: Paramount swung to a $152 million net profit, driven by restructuring and cost controls. Free cash flow was $302 million, down 23% year-over-year, as spending increased on content and merger-related expenses.
What to make of all this?
Paramount’s Q1 demonstrated solid streaming growth and narrowing losses. However, linear TV remains a drag, and regulatory hurdles surrounding the Skydance merger could add uncertainty in the coming quarters. Management remains cautious about potential macro headwinds and the Trump lawsuit.
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Disclosure: I own AAPL, AMZN, GOOG, NFLX, and ROKU in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): 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.