Streaming Video Services Seek A Balance Between Growth And Profitability

Investors in media companies have turned sour on streaming video services, the vast majority of which are bleeding red ink. Many consumers are switching back and forth between services, binge watching all that they can and then moving on.

Although Walt DisneyDIS
Company made a complete U-Turn when the company reappointed Bob Iger CEO and he pledged to focus on profits rather than subscriber growth at its streaming services, others like Comcast’sCMCSA
NBC Universal’s Peacock, are shifting significant resources to the platform.

Management has pledged to put more expensive sports content and big budget movies on the platform, and it appears that they are still in a growth trajectory while other streamers have seen waning subscriber growth, particularly in the U.S.

Speaking at the 2022 UBS Global TMT Conference which was held in New York Dec. 5-7, NBCUniversal CEO Jeff Shell said, “It’s hard for me not to get out of my seat right now and jump up and down about how Peacock is doing. I’ll give you a little bit of news this morning…at the end of the last quarter, we reported that Peacock was over 15 million paid subscribers and we’re as of this morning, over 18 million subscribers,” he said.

That’s a remarkable feat given that many analysts were skeptical of the service when it launched about three years ago. The online service has doubled paid subs from the beginning of the year and is up 20% quarter over quarter. And that doesn’t include the subs that are bundled for free with Comcast video subscribers, which help on the ad sales front.

On the subscription side of the equation, the company is already at a run-rate of $2 billion in revenue, with new subscribers being fueled by movies, the content which was pulled from the Hulu platform and now airs on Peacock, and sports. “We clearly have the best sports offering of any service out there,” he said. “Every sports deal we have has a Peacock component, whether it’s NFL or YES, EPL, World Cup, which we didn’t even know when we did it had a streaming component.

That being said, it’s not all good news at Peacock and the broader NBC Universal broadcast and cable networks, which rely heavily on advertising spending. Although theme parks have not been impacted by the weak economy, Shell admitted that there was a big softening in the ad market, although it has been like this for some time.

“The advertising market has been really pretty steadily worsening over the last 6 to 9 months. And I think its gotten even worse really in the last month or so,” he said. Whereas the company used to get cash for ad buys for high-profile content like Sunday Night Football a month or so before the games air, it’s now coming in just days before the events are broadcast.

This indicates that ad buyers don’t know whether or not a big recession is looming, and gives them flexibility to cancel ads at the last minute if it appears that the economy is quickly going south. There have been varying reports from economists regarding whether we will have a “soft landing” or go deep into a recession, concerning ad buyers.

Their frustration has mounted because there are so many uncertain variables such as Russia’s war against Ukraine and the many rippling effects this drawn out crisis has created.

Still, Shell predicted that ad revenue will be up in the mid-single digits in the fourth quarter from a year ago, a much better showing that many of its competitors have issued guidance for. This is in part due to the success of Peacock, a combination of longer viewing times and rapid subscriber growth. “Peacock is not cyclical,” he said.