From the Investor Calls: Q1 2023
Here’s what streaming executives told Wall Street
In January and February, the companies that own our favorite streaming services discussed their quarterly results with Wall Street analysts. After going through the transcripts (you’re welcome), the common thread seems to be how they plan to get more money and profit out of every subscriber.
Before I break it all down, here are all the complete executive commentaries to read at your leisure:
- Walt Disney Corporation (Disney+, Hulu/Hulu+LiveTV, ESPN+)
- Comcast (Peacock)
- Paramount (Paramount+, Pluto)
- Amazon (Prime Video, MGM+, Freevee)
- Alphabet (YouTube, YouTube TV)
- Warner Bros. Discovery (HBO Max, Discovery+)
- DISH Networks (Sling TV)
“Trust us, 2024 is going to be great!”
Streaming services launched within the past few years have been losing money left and right. The big news on this quarter’s investor calls has been how much money they’re…still losing. But it’s not as much!
Execs at several companies threw out the term “peak investment” to describe how 2023 will be the last year their direct-to-consumer streaming operations spend more than they make — they promise!
ARPU, ARPU, ARPU!
One way they’ll get there is by not obsessing over subscriber counts. Instead, the focus will shift to average revenue per user (ARPU). The executives talked about three main ways to squeeze more money from us consumers:
- Prices increases
- Ad-based subscription tiers
- Advertising sales
Many streamers raised prices in 2022. This year, some companies hope consolidation will boost revenue. Paramount+ and Showtime will become one service with a higher monthly fee, as will Discovery+ and HBO Max. Executives said they would keep looking at prices, but WBD cited opportunities to raise prices internationally.
Ad-based subscription tiers
Most on-demand streamers now have low-cost-with-ads subscription tiers to make money from new audiences. It looks like it’s working. Netflix reported its with-ads tier drove signups without many downgrades from existing subscribers.
With-ad tiers also create a digital advertising sales channel. WBD attributed part of its profit success to putting ads on all HBO Max content rather than select titles. Paramount saw a 4% boost in ad revenues on Paramount+ and its free ad-supported TV (FAST) service, Pluto.
Cutting costs by focusing on franchises
The other way past peak investment is cost cutting. For companies with production studios, that means new content strategies. Expect less originality in original content. Instead, production slates will focus on tentpole franchises.
Along those lines, WBD execs explained last year’s controversial content moves. They were removing content that they found wasn’t driving new subscriptions or reducing churn (industry speak for stopping subscription cancellations).
Direct-to-streaming movies was one example, partially explaining Batgirl’s cancellation. Other content sat unwatched in HBO Max’s catalog, so shows like Westworld moved to FAST providers like Tubi.
DISH executives said their FAST option, Freestream, is a way to limit Sling TV’s churn. Since customers tend to pause their subs between sports seasons, Freestream gives them a place to stay in the Sling ecosystem.
Cord-cutting is here to stay
There was a remarkable amount of honesty about linear TV’s dismal future from executives at Disney (ABC), Paramount (CBS), Comcast (NBC and cable services), and DISH (satellite service).
Returning Disney CEO Bob Iger explained, “technology is basically creating a huge authority shift from the producer and the distributor to the consumer.” Iger acknowledged that people increasingly subscribe for a month to watch one program and then move on.
Without in-house studios generating original content, DISH is in the toughest position. That’s why Sling TV is fighting against fees charged by local TV stations. DISH founder Charlie Ergen pointed out that “customers are going to find alternatives to the networks” as content goes to streaming. That makes high local TV fees hard to justify.
Our takeaway: Netflix is outta sync
With all this talk of “peak investment” and “authority shift,” Netflix had a distinct don’t-worry-be-happy tone. COO Gregory K. Peters said Netflix’s plan was “continue to execute the play that we’ve got and do it better and better.”
If you read last week’s newsletter (you did, right?), you know I’m not as upbeat. Netflix faces the same economic headwinds and doesn’t have the tentpole franchises of its rivals. I don’t think with-ads and the crackdown on password sharing will take them far enough.
Bring out your ghostly pom-poms, as School Spirits drifts onto Paramount+ today, March 9th.
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Joe continues his tenure in London in You S4 Part 2, dropping on Netflix today, March 9th.
In this month’s issue of The Popcorner, find out what shows and movies were lighting up people’s screens.
Idris Elba slips back into his acclaimed titular role in Luther: The Fallen Sun, coming to Netflix Friday, March 10th.
Kerry Washington and Delroy Lindo star in Hulu’s UnPrisoned, releasing on Hulu Friday, March 10th.
Chang Can Dunk is slamming onto Disney+, Friday, March 10th, bringing basketball and high school woes.
Ted Lasso is back with a brand new batch of biscuits, the series’ third season hitting the pitch on Wednesday, March 15th, on Apple TV+.
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