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Hollywood is learning it’s hard trying to be Netflix

  • Streaming services like Disney+ and Paramount+ have seen subscriber growth this year.
  • But amid a changing streaming landscape and economic uncertainty, Wall Street isn’t satisfied.

In some respects, Disney beat Wall Street expectations on Tuesday.

The company reported that its Disney+ streaming service added 12.1 million subscribers in its most recent quarter, bringing the total subscribers to 164 million globally. In total, Disney has 235 million subscribers across its streaming services, which also include Hulu and ESPN+. Netflix, by comparison, has 223 million subscribers.

Two years ago, at the height of the pandemic, Disney’s subscriber growth might have satisfied investors. Disney’s streaming business was a bright spot for a company whose other sectors, such as theatrical movies and theme parks, were in distress.

But a lot has changed about the streaming space since 2020. More companies, from Paramount to NBCUniversal, have launched their own services, crowding the market. Now, in an uncertain economic climate, consumers are tightening their budgets. And Wall Street now isn’t so much interested in subscriber growth as it is revenue.

Netflix is partly to blame. The streaming giant spooked Wall Street after it lost subscribers for the first two quarters of the year. It rebounded in Q3, but essentially told investors to start considering revenue more than sub growth. Netflix also said it wouldn’t offer a subscriber addition forecast in future earnings reports.

Disney, meanwhile, said its streaming business lost $1.5 billion in its most recent quarter, and its 2023 losses could be higher than expected. It still expects Disney+ to be profitable by 2024 — barring any “meaningful shift in the economic climate,” CEO Bob Chapek said on an earnings call on Wednesday.

Disney’s stock was down 13% on Wednesday, the biggest dip in two years. It appears Disney+’s growth wasn’t enough to satisfy Wall Street.

Disney can undoubtedly compete in the streaming space against Netflix and tech giants like Amazon and Apple. But its earnings miss, and Wall Street’s reaction, reflects a larger issue across the entertainment industry — raising questions about whether others can, or should, adequately compete, as well.

“Cut back on streaming too much and you risk being left in the exhaust fumes of the better-funded competitors,” Puck’s Matt Belloni wrote in a recent edition of his What I’m Hearing newsletter. “Go all in and you risk spending yourself out of business.”

Recent earnings for other media companies also show that Wall Street isn’t all that impressed by subscriber growth:

  • Paramount Global’s Paramount+ added 4.6 million subscribers in the most recent quarter. The stock dipped 12% after earnings.
  • Warner Bros. Discovery added nearly 3 million total subscribers across HBO Max and Discovery+. The stock dipped 5% in after-hours trading.

Both companies launched their streaming service during the pandemic, at a time when streaming was seeing a surge with people staying home, and they’ve had various degrees of success.

Max saw impressive growth last year as Warner Bros. movies hit the service the same time as theaters. Since rebranding from CBS All Access to Paramount+, the service has grown in favorability across age demographics, particularly with millennials and Gen X, according to Morning Consult Brand Intelligence.

And then there’s NBCUniversal’s Peacock, which gained subscribers in Q3 after remaining flat in Q2. But at only 15 million paid members in over two years, the service is lagging rivals.

None of them have made the kind of gains Disney has, however. And each streaming business is losing money. The narrative around the space has shifted rapidly because of this.

Lightshed analysts Richard Greenfield and Brandon Ross predicted in a report this week that the companies will sell more and more content to third parties, while still trying to prop up their streaming businesses, essentially becoming “arms dealers.”

“The only question is who raises the white flag first, meaning abandoning streaming,” they wrote.

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