After years of criticism from Wall Street that streaming was an unprofitable business model, legacy media is finally starting to turn the corner on profitability in its online ventures.
The studios have inched towards positive returns largely through cost-cutting, bundling, ad tiers and price increases. But they have yet to prove they can make streaming consistently profitable over multiple quarters. And the major legacy studios still have a long way to go before catching up to streaming leader Netflix.
The latest round of earnings reports from the major studios offered a mixed picture of the sluggish road to streaming returns.
In its third quarter of 2024, Disney posted its first combined profit across its three streaming services — $47 million on revenues of $6.38 billion, compared to a loss of $512 million on revenue of $5.53 billion in the prior-year period. The milestone, while modest, came a quarter ahead of the company’s own guidance. It was led by ESPN+ with a $66 million quarterly profit, compared to a loss of $7 million a year ago. Disney+ and Hulu, for their part, didn’t turn a profit, but they narrowed their combined operating loss by 96% to $19 million.
Also last week, Paramount+ posted its first-ever quarterly streaming profit of $26 million, compared to a loss of $424 million in 2023. But executives warned it would generate losses in the third and fourth quarters due to the timing of content expenses. Paramount+ remains on track to reach domestic streaming profitability in 2025.
While Warner Bros. Discovery posted a streaming profit of $103 million in 2023 and $86 million in the first quarter of 2024, the DTC division posted a second quarter loss of $107 million, ballooning from a $3 million loss in the prior-year period. WBD’s DTC results are less comparable to the company’s rivals, as they lump together Max, Discovery+ and traditional HBO cable subscriptions.
And Peacock, which narrowed its loss from $651 million to $348 million, is inching closer but has not set a timeline for reaching streaming profitability.
When it comes to subscriptions, Netflix continues to hold a steady lead over its competitors with 277.65 million subscribers after adding 8.05 million in its latest quarter, a year over year increase of 16.5%.
Rounding out the top three was Disney+, which added 200,000 subscribers for a total of 153.8 million globally, a 2% increase from the previous quarter, followed by WBD, which added 3.6 million direct to consumer subscribers for 103.3 million globally.
While maintaining the fourth place spot, Paramount+ lost ground after shedding 2.8 million subscribers to land at 68.4 million during the quarter, while Disney’s Hulu inched closer, adding 900,000 subscribers bringing its total to 51.1 million. ESPN+ added 100,000 subscribers for a total of 24.9 million, though that was a 1% drop from 25.2 million subscribers in the year-ago period. Still, that narrowed the gap with Peacock, which shed 500,000 paid subscribers for a total of 33 million.
As for average revenue per user (ARPU), Netflix continued to lead the pack domestically at $17.77 in the U.S. and Canada, followed by Hulu at $12.87 and Warner Bros. Discovery at $12.08. Peacock, which did not update its ARPU figure, has previously hovered around $10, while Disney+ fell slightly to $7.74 in its latest quarter and ESPN+ grew to $6.23.
This analysis does not include Prime Video or Apple TV+, which do not disclose quarterly subscriber and ARPU figures. Following the launch of its ad-supported offering in January, Prime Video revealed that brands can reach 200 million monthly viewers, including 115 million in the United States.
Netflix
Netflix’s total subscriber count included 1.45 million paid subscriber additions in the U.S. and Canada for a total of 84.11 million; 2.24 million in the Europe, Middle East and Africa region for a total of 93.96 million; 1.53 million in Latin America for a total of 49.25 million and 2.83 million in the Asia-Pacific region for a total of 50.32 million.
Average revenue per paid member (ARM) grew 7% to $17.17 in the U.S. and Canada, but fell 1% to $10.80 in the EMEA region, 3% to $8.28 in Latin America and 6% to $7.17 in the APAC region.
Starting in the first quarter of 2025, Netflix will no longer disclose its quarterly subscriber or average revenue per paid member as it shifts its focus to revenue, operating margins and engagement.
As it looks to capitalize on the 80%+ share of TV time that neither the company nor YouTube own, Netflix said it would ramp up its video game offerings and has started testing a new TV homepage designed to improve the experience for its subscribers.
The company also continues to focus on scaling its ad tier, which reached 40 million monthly active users in May and now accounts for more than 45% of Netflix’s sign-ups in the 12 countries where it is available. In order to scale the offering, Netflix previously said it planned to retire its ad-free basic plan in countries where the ad-supported offering is available, starting with the U.K. and Canada in the second quarter.
Netflix also plans to shift to an in-house ad tech platform that will begin testing in Canada in 2024 and launch more broadly in 2025. Executives view the addition of live events, such as its partnership to stream NFL games on Christmas Day, as another opportunity to help scale the advertising business.
“We believe that we’re on track to achieve critical ad subscriber scale for advertisers in our ad countries in 2025,” the company wrote in its quarterly shareholder letter. “But building a business from scratch takes time — and coupled with the large size of our subscription revenue — we don’t expect advertising to be a primary driver of our revenue growth in 2024 or 2025.”
While it won’t rule out partnerships, Netflix said it has no plans to bundle solely with other streamers, noting it “already operates as a go-to destination for entertainment thanks to the breadth and variety of our slate and superior product experience.”
Disney+, Hulu and ESPN+
Disney+ added 700,000 core subscribers for a total 118.3 million. The figure included an increase of 800,000 domestic subscribers for a total of 54.8 million and a loss of 100,000 international subscribers for a total of 63.5 million, excluding Disney+ Hotstar, which lost 500,000 for a total of 35.5 million. For the fourth quarter, the company is forecasting modest Disney+ core subscriber growth.
Disney+ domestic average revenue per user (ARPU) fell 3% to $7.74 due to the impact of subscriber mix shifts, while international ARPU excluding Hotstar grew 2% to $6.78 due to price increases. That was partially offset by an unfavorable foreign exchange impact. Hotstar ARPU grew 50% to $1.05, driven by higher ad revenue.
Hulu reported a total of 51.1 million subscribers, up 2% from 50.2 million in the previous quarter. That figure included 46.7 million SVOD-only subscribers, an increase of 900,000, and 4.4 million Hulu + Live TV subscribers, a decrease of 100,000. Hulu SVOD-only ARPU grew 8% to $12.87, while Hulu + Live TV ARPU ticked up 1% to $96.11, both driven by higher ad revenue.
ESPN+ added 100,000 subscribers during the quarter bringing the total to 24.9 million, though that marked a 1% decrease from the 25.2 million subscribers in the year-ago period. ESPN+ ARPU grew 14% year over year to $6.23 driven by price increases and higher ad revenue.
“We remain on track for the profitability of our combined businesses to improve in Q4, with both Entertainment DTC and ESPN+ expected to be profitable in the quarter,” Disney said in its earnings release. “We continue to feel optimistic about our trajectory, with multiple building blocks for improving margins over the coming years.”
To reach streaming profitability and double-digit DTC margins, Disney has been cutting costs, including through content write-offs and layoffs, as well as raising prices, bundling and launching an ad-supported streaming tier for Disney+.
It is also cracking down on password-sharing. Disney began notifying users about the crackdown in June, which will roll out more broadly in September. In October, Disney plans to raise prices for several of its subscription plans, coinciding with the launch of Disney+’s continuous playlist feature on Sept. 4. Disney also plans to put an ESPN tile in Disney+ by the end of the year and launch a flagship ESPN direct-to-consumer service at the end of 2025.
“We know that we need stronger recommendation engines, and we’re working on that technology, and we need to make our marketing more efficient,” Disney CEO Bob Iger said. “But by adding all of these features, both on the technological side and also on the programming side, we’re bullish about the future of this business.”
Warner Bros. Discovery
WBD’s DTC division added 3.6 million subscribers during its second quarter of 2024 for a total of 103.3 million globally. The figure included 52.4 million domestic subscribers and 50.8 million international subscribers.
Average revenue per user grew to $12.08 domestically, $3.85 internationally and $8 globally. The increase in global DTC ARPU was primarily driven by the growth of the ad tier domestically along with continued subscriber mix shift from linear wholesale to other distribution channels, partially offset by growth in lower ARPU international markets.
Max has launched in 65 international markets, but is still not present in over half of its global addressable markets, including Australia, Japan, the UK, Germany and Italy. The company plans to continue launching in new markets over the next 18 to 24 months, with a launch in the U.K. slated for 2026. It also said it has been “reimagining” existing partnerships with international distributors of its linear channels to encourage them to distribute Max.
“These partnerships help get Max on the devices of more consumers faster and at a fraction of the acquisition cost,” CEO David Zaslav said. “We’ve done more than 150 of these deals to date in Europe and in Latin America, and you’ll begin to see them really pay off and we have more to come.”
Zaslav also touted the benefits of the company’s ongoing bundling efforts on reducing churn and lowering the cost of entry for consumers. WBD recently launched the Disney+, Hulu, Max bundle and will be part of Venu Sports this fall.
While the U.S. market has the biggest near-term upside, WBD executives expect the bulk of DTC subscriber growth to come from international markets, and the company is looking to monetize in all regions. WBD recently raised the price of the ad-supported and ad-free versions of Max in the U.S., which resulted in better-than-expected churn.
“I expect the DTC segment to be nicely profitable for the full year, and with a strong ramp in the second half, which will represent a meaningful step towards our 2025 EBITDA target of at least $1 billion,” CFO Gunnar Wiedenfels said. “That said, as I’ve noted, we will always prioritize investing to secure profitable Max subscribers versus maximizing near term EBITDA in any given quarter or year.”
Paramount
Paramount+’s subscriber loss was due to the planned exit from a hard bundle agreement in South Korea and elevated churn from a cohort of subscribers that joined for the Super Bowl in the first quarter. The company does not disclose the service’s average revenue per user, but touted a 26% year-over-year increase during its second quarter of 2024.
“We expect Paramount+ to return to net subscriber growth in the second half of the year as we benefit from a more consistent cadence of original content,” Paramount CFO Naveen Chopra told analysts last week during the company’s second quarter earnings call. “Now that we’re beyond the impacts of the strike, we also expect normalized international subscribers for the remainder of the year.”
Starting Aug. 20, the price of Paramount+ with Showtime will increase by $1 to $12.99 per month, while the Paramount+ Essential plan will jump $2 to $7.99 per month for all new subscribers. The change will take effect for existing Paramount+ with Showtime subscribers on their next billing date on or after Sept. 20.
“We don’t expect a meaningful financial impact from the new price increase until Q4 given the time required to implement the price changes across our distribution channels, and because the price increase on the ad supported tier only applies to new customers,” Chopra added.
As part of a long-term strategic plan designed to accelerate streaming profitability that was first unveiled by co-CEOs Brian Robbins, Chris McCarthy and George Cheeks in June, Paramount is laying off 15% of its total U.S. workforce in areas including marketing and communications, finance, legal, technology and other support functions. The company also plans to shutter Paramount Television Studios by the end of the week as part of its broader restructuring.
The layoffs and studio closing are included in the $500 million in previously announced cost cuts, which are part of $2 billion in associated cuts related to the pending merger with David Ellison’s Skydance Media, which is slated to close in the third quarter of 2025.
In addition to the cuts, Paramount has hired bankers to help the company with possible asset sales. TheWrap exclusively reported that Paramount sold the ComicBook and PopCulture websites to Nashville-based Savage Ventures for an undisclosed amount. Four individuals familiar with the co-CEOs’ plans previously told TheWrap that other possible assets that could be put up for sale include Pluto TV, BET, VH1 and the Paramount lot, which would be leased back for the studio’s use.
“The set of assets that make up Paramount Global today were built up through the rise of linear and while we have strong brands and businesses, we must reshape our portfolio to best compete in the future,” McCarthy said during Paramount’s second quarter earnings call last week. “The assets under consideration are undeniably strong with exciting futures ahead, but will be better served on their own or as a centerpiece of another business.”
Paramount is also in “active discussions” about potential strategic partnerships or joint ventures.
“That includes a series of partnerships that could potentially involve some licensing, but we’ll also be licensing content in addition to that,” McCarthy added during the earnings call.
Peacock
Peacock shed 500,000 paid subscribers for a total of 33 million at the end of Comcast’s second quarter of 2024, but the figure marked a 38% increase compared to the prior-year period. Executives did not provide an update on average revenue per user, though they’ve previously said it’s around $10.
NBCUniversal anticipates “modest” growth in overall media EBITDA, but noted that the degree of year over year improvement would vary based on timing of sports, entertainment launches and marketing. As a result, the company warned that EBITDA growth would be skewed to the fourth quarter of the year. When asked specifically about when Peacock would break even, Comcast president Mike Cavanagh said he doesn’t look at the platform on a standalone basis.
“This is a year where we see the growth in Peacock, offsetting the decline in some of our linear businesses,” he said. “And that’s basically a trend I would expect to see carry forward.”
Cavanagh noted there would be “ebbs and flows” that would impact the media business’ trajectory, such as Comcast’s new NBA package.
“Obviously, we’ll make some adjustments and it might pause our trajectory of the year we take it onboard,” he added. “But I think it’s part and parcel of the idea that we’re bringing the media business to a better future by investing behind Peacock and doing it together with all our assets, entertainment, sports and news as what our media business will look to be in the future.”
