Media giants like Disney and Netflix are in crisis: their streaming performances are disappointing expectations, putting the entire sector in dire straits.
In 2020, nobody would have predicted that streaming service would go through a major crisis in just three years time. While many believed the Covid-19 pandemic would mark the end of cinemas, it was just a minor hiccup for theaters as they are up and running again.
The same cannot be said for streaming sites. Most of them, including the major players, are struggling to keep growing and turning their activities profitable. And, it seems, there is no good solution in sight.
The level of the crisis was clear to everybody yesterday as giant media conglomerate Disney released their quarterly earnings. While revenues remained pretty much in line with expectations, operating income declined by 11% year on year.
The media and entertainment sector was the one struck the most, with a 42% decrease in operating income year on year.
But the worst disappointment for Disney and for investors was the streaming performance. Disney+, one of the biggest competitors in the industry, lost 4 million subscribers. This drop brought worldwide subscribers to 157.8 million, widely missing the estimate of 163.1 million.
This is the second quarter in a row that sees a decline in Disney+ subscribers. CEO Bob Iger expected the service to become profitable by 2024, but with such numbers it’s a miracle it ever will.
The streaming crisis
Disney+ is only the latest streaming service to join a period of crisis for the whole sector. Netflix, the company that created the modern on-demand market, has had a rough 2022. One year ago, Netflix lost subscribers for the first time in 10 years, with shares dropping 72% from their all time high in November 2021.
In the first quarter of 2023, Netflix added 1.75 million subscribers, mostly from emerging markets in Asia. The estimates, however, were higher at 2.06 million predicted new customers, leading to a further 11% drop in the stock price.
Paramount, the newest company to join the streaming market, also saw a 28% fall in stock price last week after a disappointing performance by their platform: Paramount+.
Netflix and Disney attempted to increase revenues by implementing an ad-based subscription level. This strategy appears to work only partially as Netflix also tries to crackdown on password sharing.
Netflix’s new policy, yet to be expanded worldwide, requires additional fees for different profiles joining into the same account.
It is nevertheless clear that streaming services are in crisis. Many believe their overall value dropped as too many platforms led to a vast separation of content. For customers it is simply easier to pirate movies instead of paying for 5 different streaming services whose content changes constantly generating endless confusion.
A systemic change is needed. Fast.
