Future of TV Briefing: The subscription-based streaming war is demanding bigger war chests

This week’s Future of TV Briefing looks at what TV and streaming companies’ latest earnings reports indicate about the state of the streaming business.

Streaming price hikes
Streaming steals viewership share from cable TV
Roku’s smart TV ambitions, Hollywood’s COVID protocols and more

The subscription-based streaming war is demanding bigger war chests

The key hits:

Increasing competition for subscribers is coinciding with increasing streaming investments.
However, not everyone is stretching their streaming pocketbooks to the same extent.

While the business of streaming continues to grow, that growth is getting more expensive.

In general, the fourth quarter of 2021 continued a boom period for the streaming industry that especially picked up in the early days of the pandemic. However, the 2020 streaming surge settled down in 2021 and, in 2022, the bill for companies to compete in the subscription-based streaming war is rising, as indicated by major streaming owners’ recent quarterly earnings reports.

The market of major subscription-based streaming services has expanded significantly over the past two years. The array now spans the legacy set of Netflix, Amazon Prime Video and Disney’s Hulu as well as relative newcomers like Disney’s Disney+, WarnerMedia’s HBO Max, Paramount’s Paramount+ and Comcast-owned NBCUniversal’s Peacock. And that widening field seems to be affecting every player’s ability to accrue new subscribers — even Netflix’s.

“While this added competition may be affecting our marginal growth some, we continue to grow in every country and region in which these new streaming alternatives have launched,” Netflix said in a letter to shareholders published on Jan. 20.

In light of this heightened competition, companies like Comcast, Disney and Paramount are preparing to put even more money into their respective streamers in order to boost their programming libraries and bolster their allure to subscribers.

Comcast plans to spend $3 billion on Peacock this year, double its investment in 2021, and expects the figure to reach $5 billion “over the next couple of years,” Comcast CFO Michael Cavanagh said during the company’s earnings call on Jan. 27.
Disney’s streaming programming and production costs totaled $3 billion in its most recent quarter, up 36% year over year. The company’s streaming investment will balloon to $3.2 billion for the first three months of 2022.
Paramount spent $2.2 billion on its streaming businesses in 2021, up 120% from 2020. The company had already expected to increase its annual investment to $4 billion in 2024, but now it has revised that estimate up to at least $6 billion.

However, the streamers’ revenues are not growing enough to cover the rising costs.

Comcast lost $1.7 billion on Peacock in 2021 and expects to lose $2.5 billion on the streamer this year.
Disney’s streaming division recorded a $593 million operating loss for the final three months of 2021.
Paramount does not break out its streaming margins, but it reported streaming revenue of $1.6 billion for 2021, which was $600 million shy of its streaming investment for the year.

To be fair, this all seems pretty par for the course for streaming and, more broadly, technology businesses. Like Kevin …read more

Source:: Digiday