Chasing Netflix: How the Major Media Companies Stack Up in Subscribers, Revenue, and Challenges [Part Four]

Media giants in the highly competitive streaming market are grappling with subscriber churn, rising content costs, and profitability. As they transition from traditional models to streaming, these companies face increasing pressure to prove the long-term sustainability of their digital transition.

The following five-part article series looks at how the major streaming services compare in terms of financial performance, subscriber numbers, and the unique strengths and challenges each faces in the ever-evolving streaming industry, continuing with a review of mid-tier streamers Paramount+ and Peacock. [Part One here], [Part Two here], and [Part Three here]

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The Looming Impact of Content Spending

One of the most significant challenges all streaming companies face is the rising cost of content production. Netflix, Disney, WBD, and others spend billions of dollars annually to create new shows and films that keep audiences engaged. While content is critical for subscriber growth and retention, the immense costs weigh heavily on their financials.

The question now becomes: how much content is enough? Many platforms are dialing back their content spending as more platforms shift towards profitability. Netflix, which led the charge in original content production, has begun to slow its investments, prioritizing projects that guarantee high returns. Disney, Paramount, and WBD have also announced plans to trim their content budgets while continuing to rely on tentpole projects and franchises that are already proven hits, albeit ever diminishing.

The shift away from aggressive content spending will have far-reaching consequences for the industry. Smaller players without vast libraries to fall back on may struggle to compete if they cannot afford to create original shows at the same scale. The future will see an increasingly consolidated streaming landscape, where only the most prominent companies with the deepest pockets are able to thrive through bundling and shared production costs.

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Streaming Snapshot: Paramount+ (Including Showtime)

• Subscribers: 68.4 million (-2.8 million)
  • Losses due to exit from South Korea and post-Super Bowl subscriber churn.
• ARPU: Not disclosed but reported a 26% YoY increase.
• Key Strategies:
  • Price increase of Paramount+ with Showtime to $12.99 per month.
  • Cost-cutting measures, including layoffs and potential asset sales.
  • Focusing on subscriber growth with original content and restructuring.

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Paramount+: Efforts to Secure Long-Term Streaming Success

Paramount+ has seen mixed results in its pursuit of profitability. The platform recently posted its first quarterly profit of $26 million, though executives caution that future losses are expected due to the timing of content expenses. With 68.4 million global subscribers, the service shed 2.8 million during the latest quarter but remains on track to achieve U.S. profitability by 2025.

Paramount has introduced price hikes to accelerate profitability and bundled Paramount+ with Showtime. Despite these efforts, the company faces ongoing challenges in sustaining subscriber growth while managing the high costs of original content production. Paramount is also exploring asset sales and strategic partnerships as part of its broader restructuring.

In 2023, Paramount+ had a strong year, with streaming revenue growing by over 35% and the addition of 11.6 million subscribers, bringing the total to 67.5 million. Paramount has leveraged high demand for its content to secure lucrative licensing deals, increasing television licensing revenue by 27% year-over-year, mirroring the syndication model that was once key to linear television’s success.

Despite this progress, Paramount has faced obstacles, including fluctuations in subscriber numbers and production delays due to strikes. The platform plans to focus on original content to boost engagement, with profitability in the U.S. market anticipated next year.

While Paramount+ has some original content, it pales compared to the hundreds of Netflix and Hulu originals. Many Paramount+ original series are reboots or spin-offs of CBS, MTV, and Nickelodeon shows.

While Paramount’s journey toward profitability shows promise under likely new ownership, uncertainty remains, especially as it faces stiff competition from other legacy media giants and tech-driven platforms like Netflix and Prime Video.

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Streaming Snapshot: Peacock

• Subscribers: 33 million (-500,000)
• ARPU: Approximately $10 (not updated recently)
• Key Strategies:
  • Aiming to balance Peacock’s growth with declines in linear businesses.
  • Investing in live sports, entertainment, and bundling with linear assets.
  • Targeting long-term profitability with a focus on overall media EBITDA growth.

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Peacock: Struggling to Balance Streaming Growth and Profitability

Peacock, NBCUniversal’s streaming service, has grown its subscriber base significantly, reaching 33 million by the end of 2023, a 38% year-over-year increase. However, despite this growth, the platform remains unprofitable, posting a $2.7 billion loss for the year and shedding 500,000 subscribers in the most recent quarter. These struggles highlight the ongoing volatility in the streaming market for legacy media companies.

NBCUniversal is working to integrate its linear television and streaming operations, balancing the losses in traditional media with Peacock’s expanding audience. Revenue from content licensing has been a primary driver of growth, with the company reporting a 13.1% revenue increase last year due to higher content licensing and theatrical releases. By leveraging its linear television content and expanding its streaming offerings, NBCUniversal is positioning Peacock for future profitability, though significant challenges remain.

Peacock was tied for the lowest satisfaction rate (74%) compared to the other eight largest streaming services. 

With ARPU hovering around $10, Peacock has benefited from bundling deals and a robust content library, yet it has not set a clear timeline for profitability. As Comcast continues to invest in content and acquire live sports rights, Peacock’s long-term success will depend on its ability to grow its subscriber base and improve ARPU. The platform plays a crucial role in NBCUniversal’s broader media strategy, but turning it into a profitable venture is still a work in progress.

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The Growing Importance of Content Libraries

One advantage legacy media companies have over tech-driven platforms like Netflix and Apple TV+ is their massive content libraries. Disney, Warner Bros. Discovery, Paramount, and NBCUniversal all own vast catalogs of beloved films and television shows that can be monetized in multiple ways. These libraries allow licensing content to other platforms, bundling services to create added value, and leveraging franchise-driven programming to retain subscribers.

However, as each company tries to hold onto as much content as possible for their platforms, they face tough decisions about licensing valuable assets to competitors or keeping them in-house to drive subscribers.

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FilmTake Away: Paramount+, Peacock, and the Future of Bundled Services

Paramount+ and Peacock are also leaning into bundling to boost their financial standing. Paramount’s decision to bundle Paramount+ with Showtime has helped drive growth, while Peacock has focused on combining its streaming offerings with live sports to attract subscribers. As the streaming landscape becomes more competitive, bundling will be an essential tool for platforms looking to differentiate themselves from their rivals and retain subscribers.

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