Interview Synopsis

Streaming Platforms – Q2 2023 Industry Update – Netflix, Disney, Amazon, Warner Bros Discovery & Others

  • Public Equity
  • TMT
  • North America

The streaming industry is “one of the most scrutinised businesses right now”, a former VP at Paramount Streaming told Forum. Rather than growing by all means necessary, players are focusing on ARPU, profitability and free cash flow. The quest for volume is over for now, with content quality reigning supreme. Meanwhile, industry content budgets are expected to remain flat for the next 2-3 years.

Investors looking more closely at streaming business’ fundamentals

The expert said investors are no longer solely scrutinising subscriber numbers – they are looking more closely at key business fundamentals related to profitability and cash flow. The industry at large sees franchises as a long-term driver of success, but our expert noted that this can be expensive, particularly at a time when businesses are trying to reduce costs.

Turning to some of the competitive dynamics, the expert believes that after suffering consecutive declines in subscriber volumes Netflix can “turn things around”, particularly in light of the recent hire of Peter Naylor as VP of global advertising sales from Hulu. The expert also highlighted the company’s increased investment in sports documentaries and live sports content. 

With a slow start, Netflix will likely end 2023 with 7-11 million net new subscribers on its ad tier, with a potential boost from existing subscribers moving from premium subscriptions, we were told. However, other players are unlikely to follow suit on the password sharing crackdown given other “issues that are more pressing”, our specialist said. Netflix should be able to generate USD 250-500m annually from its password sharing strategy, according to our Interview.

We also discussed potential industry consolidation, with our expert sceptical that there is enough space for eight streamers and predicting that smaller platforms such as AMC+ or Lionsgate could be targets. “There’s so much content everywhere and what it’s creating is this behaviour of churn cycling.”  

Netflix and Microsoft are an “interesting combination”, having already partnered on ad tier business, and “there are a lot of reports about Apple and Disney”. The front runners will be on the tech side, we heard, because of their access to capital. 

Meanwhile, Apple TV is investing “billions of dollars” into content and could be interested in purchasing Hulu, as there are several factors that may lead neither Disney nor Comcast to want to hold on to the asset, our specialist said. However, the promotion of Hulu’s president to president of Streaming “may be a sign that they’re keeping it”.

Click here to access all the human insights in Third Bridge Forum’s Streaming Platforms – Q2 2023 Industry Update – Netflix, Disney, Amazon, Warner Bros Discovery & Others Interview. 

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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