While most major media companies have stemmed losses on subscription streaming via steep cuts in content and personnel, their revenue growth is still lagging, notes MoffettNathanson analyst Robert Fishman.
“The critical question now is whether any of these players can replicate Netflix’s trajectory and reignite revenue growth,” Fishman wrote in a paywalled report titled “Streaming Wars: A New Hope (With Higher Prices).”
While Netflix experienced an acceleration of revenue growth from 2022-2024, Warner Bros. Discovery, Paramount Skydance and NBCUniversal all saw their rates of direct-to-consumer revenue growth slow over that span.
According to Fishman, Netflix “cracked the code,” regularly upping the monthly bill for better-off customers with greater price elasticity, and generating high rates of revenue per user in the process, while sustaining subscriber growth by keeping its low-priced, ad-supported tier cheap.
The 213% price differential between Netflix’s highest and lowest tier plans is key to this strategy, Fishman notes, and it’s something the major media conglomerates should consider emulating.
“The combination of lowest entry point and the priciest top tier SVOD helps explain why Netflix has grown its base without sacrificing RPU or churning during prices increases,” the analyst wrote.
Conversely, with Disney’s relatively narrow 54% differential, its next price hike “risks alienating value-conscious subscribers while failing to fully monetize those on the premium end,” Fishman added.
As Netflix’s ad-supported subscriber base grows, and its ability to sell ads improves, Fishman added, “We expect advertising to become an increasingly important part of the Netflix revenue growth story…”
Notably, the analyst advocated that Disney, WBD, Paramount Skydance and NBCU return to a strategy MoffettNathanson first proposed back in 2015 — stop licensing content to Netflix.
“Perhaps it’s time for studios to return to the chessboard and recognize that feeding the beast with licensed content may bolster near-term earnings — but ultimately erodes the value of their proprietary IP and streaming services,” Fishman wrote.
Meanwhile, SVOD pricing strategy can have notable impact on other parts of a media conglomerate’s business. Fishman noted the recent pay TV licensing negotiations between YouTube TV and NBCU, in which the Alphabet-owned vMVPD used Peacock’s monthly price point as bargaining leverage.
“NBCUniversal is asking us to pay more than what they charge consumers for the same content on Peacock, which would mean less flexibility and higher prices for our subscribers,” YouTube TV said in a statement released to media.
Both Disney and Fox have premium-priced their new respective subscription services, ESPN Unlimited and Fox One, potentially partly for the purpose of avoiding these pay TV merchandising headaches.