2024 Was A Good Year For Streaming

For some time now, the world's biggest media companies struggled to make money off of their streaming services. The culprits: pricey content, user churn, and lots of competition. They brought that to a halt last year, 2024.

The five giants — Netflix, Disney, Paramount, NBCUniversal's Peacock, and Warner Bros. Discovery's Max — collectively reported a profit in the first nine months of the year for the very first time. In total, those five companies delivered earnings of roughly US$ 5.9 billion, significantly ahead of the US$ 142 million loss the group reported in the year-ago period.

Netflix led the charge, pulling in roughly US$ 6.9 billion in earnings in the first three quarters. (Wall Street declared the company the unofficial winner of the streaming wars.) But there's more: Earlier this week the company reported an additional US$ 1.87 billion in profits to end the fourth quarter — and nearly 20 million more subscribers.

The other four media giants will report fourth quarter results later this month and next, with Comcast first up on 30 January. A big question for investors is whether or not traditional players can successfully follow the leader.

Last year delivered some early answers. Disney and Paramount Global each reported their first quarter of streaming profits in August. Also, Peacock significantly narrowed year-over-year losses, while WBD's streaming profits ended the year on positive footing.

Macquarie analyst Tim Nollen categorized the improvements as "progress," but cautioned that even the streamers who have hit profitability don't have enough profits to generate significant margins. Most, with the obvious exception of Netflix, have hit just around breakeven.

For Morningstar analyst Matthew Dolgin, the key to success is "the pace of revenue growth." He added, "To me, profits are a lot about scale. ... So if you can increase scale, which we saw some benefits from this past year, then you can maintain profitability."

For traditional media companies, he continued, being profitable isn't enough. "Because they have terrible linear businesses that continue to decline, they need streaming to be more than just profitable. They need streaming to produce fast-growing profits."

One obstacle to achieving consistent profits is combating increased churn in the face of higher prices. (Netflix became the latest platform to boost subscription costs in the US, bumping the prices of its various tiers.)

"The bigger risk is really retaining the customer base and figuring out whether we get to a threshold where there are too many platforms," Morningstar's Dolgin said. Also, "there's a limit" to how much more streamers can raise prices. Simultaneously, there's a limit to how many more subscribers streamers can add.

"Somewhere, you need to get that right in order to keep profits growing at a good pace," he said.