This week\u2019s Future of TV Briefing looks at the latest round of quarterly earnings reports from companies including Disney, Netflix, Roku and Warner Bros. Discovery to sift through what they signal about the state of the business.<\/p>\n
The TV and streaming industry seemed to have settled into its corrective period during the fourth quarter of 2022, based on TV and streaming companies\u2019 latest quarterly earnings reports.<\/p>\n
The ebb and flow of streaming subscription growth over the past few years settled into a semblance of normalcy. Meanwhile, the ad market continued its downturn but did not nosedive into the ground to the extent some companies had feared. Nonetheless, the TV and streaming economy \u2014 as with the global economy \u2014 remained in a precarious position with companies pressed to cut costs and prove profitability, especially on the streaming side.<\/p>\n
Here is a rundown of the top takeaways for the TV and streaming industry from the most recent earnings season.<\/p>\n
Streaming subscriptions<\/strong><\/p>\n For a sign of normalcy in the subscription-based streaming market, look no further than Netflix solidifying its position at the top. The company added 7.7 million subscribers in Q4 to surpass analysts\u2019 estimates<\/a>. No, Netflix didn\u2019t break out how many of those subscribers signed up for its new ad-supported streaming tier.<\/p>\n \u201cWe\u2019re seeing take rate and growth on that ads plan is solid\u201d was about as much as Greg Peters, who is replacing Reed Hastings as Netflix\u2019s co-CEO, was willing to say during the company\u2019s earnings call on Jan. 19.<\/p>\n Surprising as the strength of Netflix\u2019s subscriber growth in the period was, similarly stunning was Disney reporting a 1% quarter-over-quarter subscriber downtick for Disney+. Disney attributed the subscriber shedding to its Disney+ Hotstar service losing 3.8 million subscribers in India and Southeast Asia after ceding Indian Premier League rights. By contrast, Disney+ added 200,000 subscribers in the U.S. and Canada, though that was only a quarter of the subscribers gained by sibling streamer Hulu in the period.<\/p>\n Streaming subscriber growth was a bit of a mixed bag across the rest of the major services in Q4. Paramount\u2019s Paramount+ attracted 9.9 million new subscribers, but Warner Bros. Discovery\u2019s HBO Max only added 1.1 million. And NBCUniversal\u2019s Peacock split the difference with a 5.5 million subscriber increase in the quarter.<\/p>\n At the close of 2022, here were the subscriber standings among the major streaming services:<\/p>\n Advertising downturn<\/strong><\/p>\n The TV and streaming ad market \u201cbottomed out\u201d in the fourth quarter of 2022, NBCUniversal CEO Jeff Shell said during the company\u2019s earnings call on Jan. 26. Of course, NBCUniversal was in a somewhat enviable position as the owner of Telemundo, which broadcast the World Cup and was cited a primary contributor to the Comcast-owned company\u2019s 4% year-over-year increase in advertising revenue.\u00a0<\/p>\n But Roku\u2019s Q4 earnings report appears to provide further evidence of the advertising downturn, if not evening out, then at least not steepening to an entirely vertical tilt. The connected TV platform owner\u2019s CEO Anthony Wood warned in November<\/a>, \u201cWe are seeing signs that Q4 is going to be worse in terms of the ad market than Q3 was.\u201d But then it turned out to be not that<\/em> terrible. Roku doesn\u2019t break out its advertising revenue, but its platform revenue segment \u2014\u00a0which includes revenue from ads as well as streaming subscriptions sold through Roku \u2014 increased by 5% year over year. \u201cQ4 platform revenue came in above our expectations,\u201d said Roku\u2019s outgoing CFO Steve Louden during the company\u2019s earnings call on Feb. 15.<\/p>\n That\u2019s not to say the TV and streaming ad market looked all that rosy in Q4. Disney-controlled Hulu\u2019s ad revenue, for example, decreased year over year in the final three months of 2022, though Disney didn\u2019t disclose specific figures. The traditional TV ad market, in particular, ended the year on a cold streak. Paramount\u2019s linear TV ad revenue slid by 7% year over year. AMC Networks\u2019 U.S. ad revenue dipped 12% year over year. Warner Bros. Discovery\u2019s linear TV ad revenue fell even further, down 17% year over year.<\/p>\n Profit and costs<\/strong><\/p>\n Subscription sales are fine, and ad dollars are nice. But what really matters at the moment is the revenue companies keep as profits after covering their costs. That prioritization is fueled, in large part, by the long-term profitability of the traditional TV business and has been augmented by the evidence in Netflix that streaming can also be a successfully solvent business.<\/p>\n Yes, once again, Netflix is the yardstick. After covering its operating expenses, including property and equipment costs, Netflix had $332 million left over in free cash flow for its Q4 operations.\u00a0<\/p>\n By contrast, Netflix\u2019s rivals from the traditional TV business continue to sink more money into their streaming businesses. Paramount\u2019s streaming business reported a $575 million adjusted operating loss in Q4 2022 compared to $502 million in Q4 2021. And Disney lost $1.1 billion on its streaming business in the final three months of 2022 after losing $593 million in the year-ago period.<\/p>\n But again, Netflix has shown there\u2019s a path to profitability in streaming. The company had gone through its period of backing up the Brinks truck to plug its service with programming in order to amass subscribers \u2014\u00a0the period its emergent rivals are currently in \u2014 but it has begun to pare back its programming costs. In 2022, Netflix spent $16.8 billion on content<\/a>, a 5% decrease from 2021.<\/p>\n Warner Bros. Discovery has been especially aggressive in cutting its streaming costs to approach profitability. The owner of HBO Max and Discovery+ still lost $217 million on its streaming business in the fourth quarter, but that was less than the $728 million it lost in Q4 2021.<\/p>\n \u201cOn the cost side, all of the trends are pointing in the right direction. We see better engagement, better churn, which makes marketing efficiencies come up. We\u2019ve right-sized the content investments,\u201d said Warner Bros. Discovery CFO Gunnar Wiedenfels during the company\u2019s earnings call on Feb. 23.<\/p>\n All of this is to say, the fourth quarter of 2022 wasn\u2019t the blockbuster period of prior years, but it wasn\u2019t altogether bleak either. More sober than somber, if you will. Considering the undercurrent of unease still circulating among TV and streaming companies, that companies\u2019 fourth-quarter results didn\u2019t send alarm bells blaring may even be somewhat reassuring amid a still-gloomy start to 2023.<\/p>\n As Netflix said in its letter to shareholders on Jan. 19, \u201c2022 was a tough year, with a bumpy start but a brighter finish.\u201d<\/p>\n \u201cThere are thousands of FAST channels that exist today. But when you look at those FAST channels, most of the platforms that have FAST channels have somewhere between zero to maybe two Black content-focused channels. And so we see that as a massive opportunity.\u201d<\/p>\n \u2014 Revolt CEO Detavio Samuels on the Digiday Podcast<\/em><\/a><\/cite><\/p><\/blockquote>\n 96.1 million:<\/strong><\/a>\u00a0Number of streaming subscribers that Warner Bros. Discovery has across HBO Max and Discovery+.<\/p>\n 25 million:<\/strong><\/a>\u00a0Number of people who use TelevisaUnivision\u2019s free, ad-supported streaming service ViX each month.<\/p>\n 7.3:<\/strong><\/a>\u00a0Number of streaming apps that the average U.S. household used in the second half of 2022.<\/p>\n 22%<\/strong><\/a>: Percentage share of iPhone owners who subscribe to Apple\u2019s Apple TV+ streaming service.<\/p>\n >1 minute:<\/strong><\/a>\u00a0Minimum length for videos to be eligible to receive money through TikTok\u2019s updated creator payment program.<\/p>\n Revolt\u2019s Detavio Samuels says advertisers have fallen short on commitments to Black-owned media companies:<\/strong><\/p>\n Listen to the latest Digiday Podcast episode\u00a0here<\/a>.<\/em><\/p>\n When it comes to the talent working on TikTok, more agencies are eying personal profiles:<\/strong><\/p>\n Read more about agencies\u2019 TikTok talent evaluations\u00a0here<\/a>.<\/em><\/p>\n How agencies are testing live shopping and seeing potential in accelerating conversions:<\/strong><\/p>\n Read more about agencies\u2019 live shopping experiments\u00a0here<\/a>.<\/em><\/p>\n What do creators really want from TikTok?:<\/strong><\/p>\n Read more about creators\u2019 TikTok critiques\u00a0here<\/a>.<\/em><\/p>\n Apple hires a streaming ad seller:<\/strong><\/a> Netflix cuts subscription prices abroad:<\/strong><\/a> Advertisers approach this year\u2019s upfront with caution:<\/strong><\/a> Talent agency preys on TikTok creators:<\/strong><\/a>\n
What we\u2019ve heard<\/h2>\n
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Numbers to know<\/h2>\n
What we\u2019ve covered<\/h2>\n
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What we\u2019re reading<\/h2>\n
Apple has tapped Lauren Fry, former CRO of TV ad targeting firm Simulmedia, to steer its Apple TV+ service into the streaming ad business, according to The Information.<\/p>\n
Just as Netflix ramps up its crackdown on password sharing, the company lowered its subscription prices in more than three dozen countries, according to The Wall Street Journal.<\/p>\n
Advertisers are not slashing their budgets ahead of this year\u2019s TV advertising upfront negotiations, but they are preparing to extend the annual haggle and angle for less lengthy commitments, according to Ad Age.<\/p>\n
Carter Agency has failed to pay TikTok creators, including BIPOC creators, for brand deals that the talent agency secured on their behalf, according to The New York Times.<\/p>\n