At least until the next big M&A deal, the so-called “Streaming Wars” have reached an entrenched state, according to the latest U.S. streaming-market deep dive from equity research company MoffettNathanson. On the subscription side, the industry remains locked in a stratified alignment with Netflix on top, Disney’s Disney+ and Hulu services and Amazon in the middle, and Warner Bros. Discovery, Paramount and NBCUniversal on the bottom rung.
Among U.S. SVODs, “engagement growth has slowed across the board so that while there’s jostling for position within those bands, no one seems on the verge of leaping upwards or downwards,” the firm wrote in U.S. Media: Streaming Scale Matters, a report issued earlier this week.
“The streaming paradigm has been established” among the major U.S. subscription streamers, MoffettNathanson declared. And as this graphic from the report shows, hours consumed per average subscriber were largely flat in the U.S. from 2023 - 2024.
“It’s become increasingly evident that these tiers are more or less fixed at this point,” stated the paper, top-lined by MoffettNathanson analyst Robert Fishman. As an example of this intractability, the research firm cited a big summer for Peacock that included live coverage of the Paris Olympics. The associated viewership pulled Peacock closer to WBD’s Max in terms of engagement, but NBCU’s SVOD still remained within the bottom rung of major U.S. subscription streaming outfits. (With WBD making significant content cutbacks in 2023, also note the engagement decline for Max over the past two-year period. And with so little known about Apple TV+ outside the hallways of Apple’s Cupertino, Calif. headquarters, also check out MF’s estimates for that now largely overlooked platform.)
Certainly, consumers still demand video entertainment, and all of that engagement is going somewhere. As the firm's report states, robust engagement growth is occurring in two ad-supported areas: Among AVOD/FAST platforms, most notably The Roku Channel, Tubi and Pluto TV; and via with the all-powerful YouTube. As this next MoffettNathanson graphic reveals, the top three AVOD/FASTs grew their combined hours viewed by 40% YoY in 2014. Factoring in living-room “glass” consumption, meanwhile, YouTube increased its engagement by 27%. The major subscription streaming services collectively expanded their streaming hours by only 8%.
For U.S. SVODs, MoffettNathanson said that growing ad revenue streams are helping to move the needle. But beyond that and the wild card of M&A, the only way out of their current rut is to increase scale. And to achieve the goal of expanding scale, streamers have to spend more money on content. But to make that affordable, they must have … scale.
Not surprisingly, Netflix serves as a model: Projected by MoffettNathan to allocate around $18.6 billion to creating and acquiring content in 2025, Netflix is far and away the most proliferate spender in the global video business. However, once that cost is amortized across Netflix’s entire subscriber base of more than 300 million members worldwide, the company ranks as only the fifth biggest spender on movies and TV shows among major U.S. media majors.
“A profitable streaming service requires scale. Full stop,” Fishman’s report stated. “It enables greater investment in content, which in turn enables greater engagement and subscriber growth. Scale begets scale.”
That said, buoyed by overseas expansion and other factors, MoffettNathanson foresees all of the major U.S. subscription streamers increasing their scale over the next few years, and by association, their profitability as measured by their margins on earnings before interest, taxes, depreciation and appreciation (EBITDA). But no company, at least not without a merger or acquisition, will be able to reach the lofty heights projected for Netflix, which MF forecasts will reach an EBITDA margin of 34% by 2027.
All of this said, MoffettNathanson cautions streamers not named Netflix from recklessly charging into the M&A market.
“Does this make the case for consolidation among the smaller platforms? Yes, it absolutely does,” the analysts wrote. "Peacock, Paramount+ and Max are not on track to reach the critical scale streaming requires on their own. Yet, we also caution that simply combining services would likely not lead to a sum greater than the individual pieces — it may even be the opposite.”