COMMENTARY Streaming Content Spend Growing Again? Good News For Profitability?

 

COMMENTARY

Streaming Content Spend Growing Again? Good News For Profitability?

• by Wayne Friedman , Staff Writer, April 12, 2024

Screen this: We might be headed in the right TV-video entertainment direction.

One hint comes from a forecast of slightly more spending on overall TV and movie content for all platforms -- including streaming, of course. 

Bernstein Research says the key is squeezing better profitability from that new content production. 

The stock market research company is now expecting a rise in content spending -- although at a slower pace than during those initial three years of starting up streaming platforms initially launched in 2019. 

From 2019 until 2022, there was high levels of spending for legacy TV-movie companies start up streaming businesses -- which all contributed to overall entertainment spend. From 2022 to 2023 there was a general decline.

Now, estimates are showing growth. At NBCUniversal, total entertainment production costs -- everything from theatrical movies to linear TV shows, local TV to streaming -- will rise to to around $27 billion by the end of the year, from about $24 billion last year. 

Netflix will reach almost $16 billion -- up from around $12 billion a year ago, with some of the largest gains. Even the seemingly beleaguered Paramount Global is estimated to climb to $15 billion in 2024 -- up from $14 billion a year ago.

Walt Disney, which rose from around $30 billion in 2022 only to drop to $25 billion in 2023, looks to hold steady or perhaps move up fractionally.

One factor driving this increase is the low spending comparisons to 2023, largely due to a period of about five months, when the business was enduring an actors' and writers' strike.

Why will this happen now? Bernstein sees improving revenue generation from those dollars -- revenue per content amortization dollar.

This means, in general, that for every $1 dollar spent on content, a $2 dollar revenue gain is projected for the business -- a  metric that has been improving slowly on an overall basis industry wide.

This means “profitability is expected to improve overall in 2024, mostly driven by DTC profitability improving for all players.”

Still everything is not smooth -- at least to those legacy TV network competitors with streaming businesses. Bernstein sees Netflix continuing to be the clear winner -- on revenue and profits per dollar spent on content. 

Looking at the broader revenue picture -- for all entertainment businesses --- Walt Disney and Paramount Global, for example, have experienced “substantial” and “significant” drops, respectively in revenue.

The positives from Bernstein are both seem have bottomed out -- yet Disney has a move positive outlook near-term.

And for Paramount? Profitability has a “uncertain” timeline.

So there is some good news to consider. Entertainment lives again.