Jul 18, 2023 - Economy

Streaming's doomsday clock

Illustration of a TV, cellphone, monitor, scissors, coins, and cursor arranged randomly around a play button within a circle made from a streaming progress bar

Illustration: Natalie Peeples/Axios

Following a brutal sell-off in the first half of 2022, Netflix has managed to claw its way back into investors' hearts, but its streaming peers face major challenges during Q2 earnings season, which kicks off this week.

Why it matters: Disney, Warner Bros. Discovery, Paramount and Comcast promised investors that their budding streaming services would be profitable beginning in 2024. Now that the clock is ticking, reality is starting to set in.

Driving the news: With the simultaneous writers and actors strikes shutting down Hollywood, a bleak ad market and a subscription slowdown, entertainment giants are scrambling to figure out how to sell their streaming visions to Wall Street.

  • Peacock said Monday it would raise its prices for the first time since it launched in 2020, joining the majority of its peers that have raised prices in recent months to help get to profitability.
  • Disney said last week it would possibly sell its non-core assets, including most of its cable channels and ABC. CEO Bob Iger, whose contract was recently extended until 2026, says he now plans to buy the remainder of Hulu from Comcast to bolster the company's streaming strategy.
  • Paramount's parent company is reportedly in talks with creditors to refinance its debt, due to heightened financial uncertainty.

Catch up quick: The economic uncertainty coming out of the pandemic forced streamers to reckon with new expectations from Wall Street around profitability.

Yes, but: To date, only Netflix has been able to convince investors that its efforts have paid off.

  • The entertainment giant's stock is up more than 52% year-to-date, while shares in Paramount and Disney are down. Warner Bros. Discovery and Comcast have seen their stock prices increase by 12% and 18% year-to-date, respectively, but that's mostly in line with the S&P 500.

Zoom in: Netflix also remains profitable while its competitors race to cut costs to get there.

  • Disney executives have expressed doubts about whether the company's streaming division will be profitable by 2024, the Wall Street Journal reported.

By the numbers: Third-party data suggests Netflix's recent password-sharing crackdown is working.

  • One of every four sign-ups for premium subscription streaming services in the U.S. last month was for Netflix, per measurement firm Antenna, a major increase from previous months.

Be smart: Hollywood's standstill is having an outsized impact on Netflix's peers, who own traditional TV networks and whose streaming services aren't yet as global.

  • Analysts have noted that Netflix's reliance on overseas production and its stockpile of pre-produced content will insulate it from the strikes.

The intrigue: Most of the ire from striking Hollywood workers has been directed at Netflix for pioneering the current streaming business model and reversing decades of industry practices.

  • Netflix's rise has also drawn all of the other media giants into a costly and money-losing battle to gain streaming subscribers.

What we're watching: That ticking clock means that even more price hikes for other streamers are likely on the horizon.

  • During his newsmaking interview with CNBC last week, Disney CEO Bob Iger admitted they priced Disney+ too low when it first launched.
  • The rapid erosion of the cable TV bundle will also force media giants to earn more money on those viewers through streaming.

The bottom line: Many in the industry blame Netflix for Hollywood's current state of chaos. Yet it's Netflix that's best positioned to run out the current streaming survival clock.

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