https://variety.com/vip/content-spending-profit-data-analysis-2024-1235969532/
April 15, 2024 - 6:00am PDT
2024 Content Spending & Profit Data Analysis: NFLX, DIS, WBD, PAR, NBCU
by Tyler Aquilina
In this article
- Profits per content amortization dollar spent at the five major non-Big Tech streamers
- How the slowdown in content spending has led to improved earnings for direct-to-consumer segments
- The companies best and worst positioned to get to profitability in streaming by the end of 2024
Hollywood’s formula for
success in streaming has transformed dramatically over the past two years, from “grow content spend as much as possible = subscribers = profit someday” to “cut content spend as much as possible + pray subscribers don’t flee = profit soon, hopefully.”
This reversal has already had a profound impact on the contact landscape (R.I.P., peak TV), but its effects on bottom lines are more hazy. No traditional studio, save Warner Bros. Discovery, has yet gotten its streaming segment into the black — and WBD did so in part by lumping in pay TV HBO subscriptions with “direct-to-consumer” revenues.
But data suggests that as expenses have come down, profitability has indeed improved and is poised to either improve further or hold steady this year for most of the major players.
With global content spending among media and tech companies poised to
grow at its slowest rate in over a decade this year (excluding the respectively COVID- and strike-affected 2020 and 2023), new estimates from Wall Street research firm Bernstein project a higher return on content investments overall across the legacy media streamers, as well as Netflix, in 2024, rising from around 30 to 34 cents on the dollar.
Using EBITDA as their metric of choice, Bernstein analysts forecast profits per content amortization dollar at the five major non-Big Tech streaming players: Netflix, Disney, WBD, Paramount Global and Comcast’s NBCUniversal.
Of these companies, two — Disney and Paramount — are expected to see modest improvements in profitability this year, while NBCU and WBD will see profits slip slightly, not significantly, from 2023 levels.
Only Netflix, meanwhile, will see a major leap in profitability — unsurprisingly, as the streaming wars’
undisputed champion will likely continue to grow revenues while maintaining more cautious levels of content spending.
Bernstein’s profit analysis focused on amortization rather than cash spending, meaning these figures illustrate the long-term returns on programming costs more so than the short-term. This is arguably a better way to analyze return on content investments, however, as the value of a title may not be realized in the same year the money is spent to produce it.
And it’s a good sign that profits per content dollar already seem to have bottomed out for most companies. Disney has been improving profitability since 2022, the year it hit peak spending on content, while WBD has grown its ROI significantly from the same year, in which the Warner-Discovery merger closed.
These statistics alone do not paint a full picture, of course. For one thing, examining operating income rather than EBITDA would undoubtedly create a much bleaker outlook; both WBD and Paramount posted overall net losses last year despite positive EBITDA (or, in Paramount’s case, OIBDA, the similar but distinct metric used in the company’s corporate filings).
But a closer look at the companies’ balance sheets also reveals improved results, at least where streaming is concerned. Direct-to-consumer losses have narrowed over the past 12 months; even NBCUniversal, which saw its annual loss on Peacock rise year-over-year, managed to trim quarterly expenses in both Q3 and Q4 ’23 from the prior year.
Disney, meanwhile, is in the midst of a remarkable financial rally, most recently shrinking its Q4 ’23 streaming loss by a whopping 86% year-over-year.
The Mouse House appears best positioned among the still unprofitable legacy streamers to make it into the black later this year, following an aggressive cost-cutting campaign spearheaded by CEO Bob Iger. Its cash content spend has fallen substantially, from nearly $30 billion in 2022 to a projected $25 billion this year, per
company statements.
NBCU’s and Paramount’s fates are less clear, however. These companies still have a long and difficult road to profits (though perhaps pooling their resources on a
joint venture would help) and likely need to trim more expenses to get there, barring a major influx of subscribers. (Peacock executives are undoubtedly awaiting this year’s Olympics coverage with bated breath.) Both companies have also
promised investors that their streaming losses
have peaked, ratcheting up the pressure to near, if not reach, profitability this year.
With 2024, therefore, set to be a decisive year for the entertainment industry (and major M&A in the offing for at least one studio), content investments, and their returns, will remain closely watched metrics as Wall Street impatiently waits for results. But the studios, and investors, can take some comfort in the fact that the great content spending slowdown does seem to be working.
