Q1 streaming earnings mark Crunch Time for Hollywood

The streaming wars have officially entered their do-or-die phase.

With the traditional studios all promising Wall Street their direct-to-consumer operations will turn a profit by 2024, pressure is only increasing on these companies to deliver improved results at their streaming segments.

Unfortunately, the most vulnerable players don’t seem able to get a handle on their expenses. Streaming losses at Paramount and NBCUniversal were up year-over-year in Q1, causing Paramount Global stock to plunge nearly 30% following its earnings report. (NBCU parent Comcast, meanwhile, actually saw its stock swing upward thanks to higher profits from its broadband business.)

It remains doubtful whether Paramount+ and Peacock can achieve the scale needed to sustain a service, begging the question, as VIP+ has pondered before, of whether they should be in the costly streaming game at all.

Of course, Paramount and NBCU are hardly the only companies struggling with streaming growth. Subscriber additions for the major U.S.-based SVODs have drastically slowed as pandemic-era expansion subsided for good, with aggregate net adds expected to turn negative for the first time in Q1, counting Lionsgate’s Starz service.

This dramatic slowdown was largely driven by lower net gains or losses internationally, such as Disney’s subscriber dropoff in India and Starz’s recent exit from several major European markets.

Global Subscriber Totals for Major U.S.-Based SVOD Services
Even not counting Starz, net sub adds dropped more than 80% YoY in Q1. Growth will likely rebound in the second half of the year as usual, but this strongly suggests that streaming will not be returning to a high-growth phase anytime soon, if ever. Indeed, Wall Street forecasts sub growth to fall below 2022 levels this year.

The only option left to streamers, then, may be the sort of highly aggressive cost-cutting Warner Bros. Discovery engaged in last year. The strategy is beginning to pay off for David Zaslav & Co.: WBD’s DTC segment scraped its first profitable quarter in Q1, helping paper over an overall loss for the quarter, with WBD stock rising slightly after its earnings report.

Disney had no such luck. Despite CEO Bob Iger’s push to slash expenses since his grand return — which reduced the company’s Q1 streaming loss about 25% versus the year prior — Disney shares plunged in the wake of its own earnings call, partly due to record subscriber losses for Disney+ (down 4 million quarter-on-quarter).

Of course, that loss was certainly foreseeable after Disney let its streaming rights for Indian Premier League cricket lapse, and it’s highly debatable whether the Mouse House’s long-term streaming prospects are really in trouble at this juncture.

It’s arguable that investors have brought down the hammer too hard after letting irrational exuberance around streaming get the better of them, but that’s likely small comfort to the companies feeling the pain of that hammer at the moment. Variety