Kicking off a series of analytical articles about trends in the content business, Parrot Analytics’ entertainment industry strategist Brandon Katz compares the streaming strategies and options for US giants Warner Bros Discovery, Paramount Global and Netflix.Navigating the labyrinth of ‘executive speak’ during each quarterly earnings season is a Herculean task. Attempting to parse out any true meaning from carefully calculated spin is practically impossible. CEOs are deftly trained verbal gymnasts when it comes to side-stepping potentially problematic business realities. So it’s perfectly understandable if you’re left reeling after all the double-talk from the first round of 2023’s media earnings reports.But by homing in on key quotes from Warner Bros Discovery CEO David Zaslav, Paramount Global president and CEO Bob Bakish and Netflix co-CEO Ted Sarandos made during these quarterly updates, we can piece together overarching ideas about the strategies that will define these companies in 2023.Last year we saw Warner Bros Discovery Zaslav focus on cutting costs. Now, he says, 2023 will be a year of building. But building requires investment and capital, plus patience. Is the company really in a position to provide those?In Q4 2022, Warner Bros Discovery’s revenue fell 11%, Ebitda declined by 5% and cash on-hand fell 22% year-on-year to just US$2.42bn, while long-term debt still stands at a prodigious US$48.63bn. Its newly stated goal of US$4bn in cost savings is unmet.Of course, it’s not all bad. The aggressive cost-saving measures did shrink the company’s direct-to-consumer (D2C) unit losses down to just US$217m at a time when major rivals like Disney and NBCUniversal are losing around US$1bn per quarter on streaming. The stock is up 58% year-to-date (as of March 9). There’s a reason other major media players have been copying Warner Bros Discovery Zaslav’s playbook in recent months. It’s a great way to buy financial runway as Hollywood attempts to figure out how to make streaming profitable.But the reality is that Warner Bros Discovery’s pockets aren’t as deep as hoped and, not surprisingly, the downsizing stunted growth. Warner Bros Discovery added just 1.1 million new streaming subscribers in Q4, the lowest quarterly total of all the major global SVoD operators. The vast majority of this growth came from the US market, where it’s actually on par with other platforms, so the slowdown is also global.It’s fair to wonder how the company plans to fuel this rebuilding after halting HBO Max’s original production and rollout in a handful of European countries last summer and lacking the cash for a fast-acting infusion of resources for market expansion.Discovery+ will remain an independent streamer, but with much of its content being integrated into a new-look HBO Max. Parrot Analytics data reveals that if you combine the 2022 US audience demand share for their total catalogues – which weighs both licensed and original movies and TV series – it results in an industry-leading 19.4% share of audience demand. Plus, the Discovery titles will help serve the older female audience HBO Max is currently lacking.But if cost-conscious consumers aren’t blown away by the complementary, yet not necessarily overlapping, portfolio of unscripted lean-back TV like Flip or Flop and prestige dramas such as The Last of Us, where is the backup growth engine? It’s a question Warner Bros Discovery likely hopes it won’t have to answer.Every CEO makes bold boasts during quarterly earnings season. It’s the nature of the business. But Paramount Global Bakish’s claims may actually ring truest of all, not that Wall Street seems to care.Paramount Global-owned CBS is primed to lead all US broadcast networks in total viewers for the 15th consecutive broadcast season. Six different Paramount Pictures films opened at number one at the US box office in 2022, including the eventual top overall grosser Top Gun: Maverick (US$718m). Paramount+ led all streaming services in Q4 2022 subscription growth with 9.9 million. New and expanded partnerships with Walmart, Delta, Sky, Canal+, Corus, Amazon and Roku helped gain international market share. Overall Paramount Global revenue increased 5% from 2021.Paramount Global isn’t without its blemishes, but one would think this foundation would elicit some optimism from investors.Instead, Paramount Global’s stock is down 43% over the last 12 months (as of March 14). The share price has tumbled around 49% from its 52-week high and 21% from its year-to-date peak. The company’s market cap stands at US$13.22bn, significantly lower than rivals Warner Bros. Discovery (US$34.63bn), Netflix (US$131.3bn), Comcast (US$150.18bn) and Disney (US$170.71bn).The financial world is reluctant to reward no matter what Paramount Global does. If investors are seemingly waiting for a juicy sale, the dour economic landscape has dulled the M&A market while leaving potential buyers skittish of piling on loads of debt. All this leaves Paramount Global in something of an awkward holding pattern for 2023, which Bakish notes will reach peak D2C investment.Paramount Global will rely on the burgeoning Taylor Sheridan universe, theatrical franchises including Scream, Mission Impossible, Transformers and Paw Patrol, and a more closely integrated Paramount+/Showtime package that emphasises popular brands to reach its goal of free cash flow in 2024.But even if Paramount Global rolls out hit after hit across its portfolio of platforms this year, there’s no guarantee it’ll matter to investors. What happens then will likely reshuffle the Hollywood hierarchy.It’s no secret that launching international sensations outside of Hollywood is Netflix’s primary focus right now in its quest for global domination. It makes sense – production costs outside of the US are typically less expensive. Since Q4 2021, subscription growth in the Lat Am (2.7 million), EMEA (6.24 million) and APAC (7.98 million) regions has far outstripped the saturated US/Canada (UCAN) market (260,000).So with the market-leading streamer attempting to keep annual content budgets from soaring above the US$17bn range without sacrificing growth, it’ll need these non-English-language series to pop. (It’s worth noting that Netflix plans to increase content spend in Asia in 2023.)Alas, the problem: the mature UCAN market still boasts Netflix’s highest average revenue per user (ARPU) at US$16.23 as of last quarter, significantly better than APAC (US$7.69), Lat Am (US$8.30) and EMEA (US$10.43). Netflix can’t simply hike prices to make up the difference, as flexible cost is what helps the streamer stay competitive in these regions. The company is even reducing prices in certain countries to compensate for expected churn from its password-sharing crackdown. So to maximise value from these international productions, Netflix needs breakout regional hits turned global victories that penetrate the UCAN market. Easier said than done.Looking at Netflix’s self-reported top 10 most-watched English-language titles in global hours viewed within their first 28 days, the average consumption is 743.6 million hours, while the average for non-English-language series is 563.6 million. From January 1 last year to March 6 this year, the top 10 most in-demand non-English-language Netflix originals in the US averaged 9.56 times more demand than the average series in that market in that span. For English-language series, that number rose nearly 200% to a multiple of 28.36.None of this means non-English-language content can’t make it in the US, but it’s far more difficult and the non-Squid Game heights are not yet comparable to English-language series. Netflix will work hard to close the gap this year in order to get more bang for its buck.
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