Streaming wars are over: what’s subsequent for the media?

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i call it The streaming wars are over. 2019-2023. REST IN PEACE.

The race between the biggest media and entertainment companies to add streaming subscribers is over, knowing consumers will only pay for a limited number of them. Sure, the participants are still running. They just don’t try to win anymore.

Disney announced that its flagship streaming service Disney+ lost 4 million subscribers in the first three months of the year, reducing the company’s total streaming subscribers to 157.8 million from 161.8 million. Disney lost 4.6 million customers for its streaming service in India, Disney+ Hotstar. Disney+ lost 600,000 subscribers in the US and Canada.

It’s become clear that the biggest media and entertainment companies are operating in a world where there’s simply no more significant growth in streaming subscribers — and they’re content not to chase it hard. Netflix added 1.75 million subscribers in the first quarter, bringing its global total to 232.5 million. Warner Bros. Discovery 1.6 million added to end up at 97.6 million.

The current big media narrative is all about making streaming profitable. Warner Bros. Discovery announced last week that its US direct-to-consumer business made a profit of $50 million for the quarter and will remain profitable this year. Netflix’s streaming business turned profitable during the pandemic. Disney announced on Wednesday that streaming losses narrowed to $659 million from $887 million.

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Netflix has slowed growth in its content spend, and Warner Bros. Discovery and Disney have announced thousands of job cuts and billions of dollars in content spend cuts in recent months. Disney will “produce reduced amounts of content going forward,” Chief Financial Officer Christine McCarthy said during Wednesday’s earnings call, though Chief Executive Bob Iger noted that he didn’t think it would have an impact on global subscriber growth.

There is still some growth among the smaller players. NBCUniversal’s Peacock added 2 million subscribers last quarter, giving him 22 million subscribers. Paramount Global added 4.1 million subscribers in the quarter, bringing the number of subscribers to 60 million.

But the key question isn’t looking at the growth numbers so much as how investors are reacting to the growth numbers. Paramount Global fell 28% in one day last week after the company announced it would cut its dividend from 25 cents a share to 5 cents a share to save cash.

Disney+ Hotstar subscribers earned a paltry 59 cents per month in revenue last quarter, compared to 74 cents last quarter. It seems Disney is OK with losing these low-paying customers. Disney gave up its Indian Premier League cricket streaming rights last year. These rights were acquired for $2.6 billion from Viacom18, in which Paramount Global has a minority stake.

Disney also announced that it will increase the price of its Disney+ ad-free service later this year. Disney’s average revenue per user for subscribers in the U.S. and Canada rose 20% last quarter after announcing another price increase last year. Big price increases aren’t typically the strategy executives use when the priority is adding subscribers.

What’s next?

Raising prices and lowering costs is not a good growth strategy. Streaming was a growth strategy. Perhaps it will bounce back a bit with cheaper advertising tiers and Netflix’s upcoming crackdown on password sharing.

However, it is highly unlikely that growth will ever return to the levels seen during the pandemic and the early years of mass streaming.

That likely means the media and entertainment industry will need a new growth story soon.

The most obvious candidate is gaming. Netflix has launched a fledgling video game service. As Puck first reported, Comcast considered buying EA last year. Microsoft’‘s deal for Activision is now in jeopardy after UK regulators blocked the deal. If this acquisition fails, activation could be an immediate target for legacy media companies looking for a more exciting story to tell investors.

While Disney has shut down its Metaverse division as part of its recent cost-cutting, the connection between its intellectual property and games seems like an obvious coincidence. It’s easy to imagine the growth potential of Disney buying something like Epic Games, which owns Fortnite, and building its version of an interactive universe through games.

There will – eventually – be further consolidation among the legacy media companies. But a major gaming acquisition could spark an industry run.

Maybe The Gaming Wars is the next chapter.

Disclosure: NBCUniversal is the parent company of Peacock and CNBC.

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