After years of struggling to turn a profit, the world’s biggest media companies finally found success in their streaming operations in 2024. The culprits behind their previous losses—expensive content, high user churn, and intense competition—have been somewhat mitigated, allowing them to post earnings for the first time.
In the first nine months of 2024, Netflix (NFLX), Disney (DIS), Paramount Global (PARA), NBCUniversal’s Peacock (CMCSA), and Warner Bros. Discovery’s Max (WBD) collectively reported a profit of about $5.9 billion, a striking turnaround from the $142 million loss they recorded in the same period in 2023. Netflix, the undisputed leader of the streaming wars, contributed a significant portion of this profit, raking in $6.9 billion during the first three quarters. The company further solidified its dominance with an additional $1.87 billion in profit in the fourth quarter, along with nearly 20 million new subscribers.
As the other media giants gear up to report their fourth-quarter results, all eyes are on whether they can replicate Netflix’s success. Comcast, the first of these companies to report on January 30, will offer some initial clues. Last year, several of the competitors showed promising signs: Disney and Paramount each reported their first profitable streaming quarters in August, Peacock narrowed its losses, and WBD ended the year with positive streaming earnings.
Despite these encouraging developments, analysts remain cautious. Macquarie’s Tim Nollen referred to these improvements as “progress,” but warned that even profitable streamers still face significant challenges. Most of the companies, aside from Netflix, have barely reached breakeven and are yet to achieve the kind of margins that could make them sustainably profitable in the long term.
Matthew Dolgin of Morningstar emphasized that scaling revenue is crucial for streaming companies to maintain profitability. He noted, “Profits are a lot about scale. If you can increase scale, you can maintain profitability.” However, for traditional media giants, just reaching profitability isn’t enough. With their legacy linear businesses continuing to decline, streaming must not only be profitable but must also generate fast-growing profits to offset losses elsewhere in their portfolios.
The so-called “streaming wars” began in earnest in November 2019 with the launch of Disney+, which ignited an intense battle for content, talent, and subscribers. This competition led to overspending, as platforms rushed to secure popular shows and top producers, driving up content costs. However, many investors soon realized that monetizing users and justifying the high cost of content was more difficult than anticipated. The relatively low subscription fees—ranging from $4.99 to $22.99 per month—make it challenging to generate substantial returns without a large user base.
To combat this issue, streaming companies began adjusting their strategies. They cracked down on password sharing, introduced multi-tier subscription models, and began focusing on higher-quality content rather than simply producing as many shows as possible. This more measured approach has allowed companies to attract and retain subscribers while better managing costs.
Macquarie’s Nollen pointed out that streamers are finally starting to balance their revenue and cost lines, but questioned how sustainable these profits really are. “It’s questionable how profitable these services can be,” he said.
One of the ongoing challenges is dealing with churn, especially in the face of rising subscription prices. Netflix, for example, recently raised its prices again in the U.S., becoming the latest platform to increase its subscription fees. Morningstar’s Dolgin noted that the real risk for streaming companies is retaining their customer base while managing price hikes. “There’s a limit to how much more streamers can raise prices, and there’s a limit to how many more subscribers they can add,” he said. “Somewhere, you need to get that right in order to keep profits growing at a good pace.”
In response to these challenges, some companies are turning to bundling, combining their services to offer more value to subscribers while creating stronger offerings. As WBD CEO David Zaslav put it last year, “There’s more strength together.” Bundling, rather than competing individually, could be the key for traditional media companies to close the gap with Netflix, Dolgin argued.
In the end, while 2024 marks a breakthrough year for streaming profitability, the long-term success of these companies will depend on how well they can balance growth, subscriber retention, and the costs of content creation—all while navigating a competitive landscape where Netflix continues to lead.
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