Netflix continues to dominate but Disney, Paramount, Comcast and Warner Bros. Discovery all expect big DTC growth this year and next
After a rough 2022 for streamers, the major players are forging ahead to find new revenue sources and trim their losses as Wall Street’s metric for success has shifted from subscribers to profitability.
Each quarter, TheWrap takes a deep dive on the latest subscriber and average revenue per user (ARPU) figures, with the freshest numbers straight from company disclosures.
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This analysis doesn’t include Amazon Prime Video and Apple TV+, because they don’t release subscriber or ARPU figures. In 2021, Amazon reported more than 200 million Prime members worldwide and said over 175 million of them streamed its film and television content.
So how do the streamers’ subscribers and ARPUs stack up against each other?
Netflix was the clear leader in number of subscribers, though Disney’s combination of Disney+ and Hulu came close to challenging it. Warner Bros. Discovery, in rolling up HBO Max and Discovery+, was a strong third, though Paramount showed much faster growth. NBCUniversal’s Peacock remains subscale.
Crucially, Netflix also made more money per user than the competition, with its ARPU suggesting a strong uptake of higher-priced plans. Hulu came next, followed by Warner Bros. Discovery and Disney+. Paramount and NBCUniversal don’t disclose ARPU figures, though their lower plan prices suggest they would not challenge Netflix’s premium pricing position.
While Netflix continues to dominate in subscribers and the money it makes from them, executives from rivals Disney, Paramount Global, Comcast and Warner Bros. Discovery all emphasized that they expect 2023 and 2024 to be pivotal years for their direct-to-consumer businesses.
Despite experiencing two consecutive quarters of subscriber declines in 2022, Netflix finished the year strong with a total of 230.8 million subscribers, including 7.66 million added in the fourth quarter. The streaming behemoth’s total revenue came in at $7.85 billion for the quarter and $31.6 billion for the full year. Netflix’s average revenue per user for the fourth quarter was $16.23 in the United States and Canada, $10.43 in the Europe, Middle East and Africa region, $8.30 in Latin America and $7.69 in the Asia-Pacific region.
In November, Netflix launched its $6.99 per month Basic With Ads tier in 12 countries. The company noted in its shareholder letter that it’s pleased with the ad tier’s progress and that its engagement has been better than expected, but acknowledged the offering is still in its early days. It also said that there has been “very little switching from other plans.” Netflix Chief Financial Officer Spencer Neumann estimated on the earnings call that advertising could eventually account for at least 10% of the company’s revenue.
Looking ahead, Netflix predicts revenue in the first quarter of 2023 will grow to $8.17 billion, driven by more paid memberships and more money per paid membership. Though the company no longer provides subscriber guidance, it predicts “modest positive paid net adds” in the first quarter of 2023, but fewer than the fourth quarter of 2022, according to its shareholder letter.
Netflix will also roll out paid sharing in the first quarter of 2023 as it looks to crack down on password sharing among an estimated 100 million households. The company expects some borrowers to stop watching rather than pay up.
While Disney’s direct-to-consumer revenues for its first fiscal quarter of 2023 increased to $5.3 billion, operating losses also more than doubled to $1.1 billion. Total Disney+ subscribers fell to 161.8 million, a drop of 2.4 million.
The average monthly revenue per paid subscriber for domestic Disney+ decreased from $6.10 to $5.95. ARPU for international Disney+ (excluding Disney+ Hotstar) decreased from $5.83 to $5.62. ARPU for Disney+ Hotstar increased from 58 cents to 74 cents.
In an effort to reach streaming profitability, Disney CEO Bob Iger announced $5.5 billion in cost cuts, including slashing 7,000 jobs. On the content side, Disney expects to deliver approximately $3 billion in savings from the move over the next few years, excluding sports. In addition to the restructuring, the company launched a $7.99 per month ad-supported Disney+ tier and raised prices on ad-free Disney+ to $10.99 per month in December.
Looking ahead, Disney said it would no longer provide long-term subscriber guidance. It also anticipates operating results in its DTC segment will improve sequentially by approximately $200 million in the second quarter of 2023. Additionally, the company reaffirmed that Disney+ would achieve profitability by the end of fiscal 2024 and that the ad tier would not provide a meaningful financial impact until later this year.
Hulu reported a total of 48 million subscribers during the fourth quarter, including 43.5 million SVOD-only subscribers and 4.5 million Live TV and SVOD subscribers.
The streamer’s SVOD-only service saw its ARPU grow from $12.23 to $12.46. Combined ARPU from Live TV and SVOD grew from $86.77 to $87.90. In December, Disney raised the price of ad-supported Hulu to $7.99 per month and ad-free Hulu to $14.99 per month.
Despite Hulu’s continued strength in Disney’s streaming portfolio, Iger has suggested he would be open to the possibility of selling the company’s majority stake in the service, telling CNBC’s David Faber that “everything is on the table.”
In 2019, Comcast and Disney established a put/call agreement for the latter to buy the former’s minority stake in the streamer as early as January 2024. Under the agreement, Disney guaranteed a sale price for Comcast’s Hulu stake that represents a minimum total equity value of $27.5 billion. Comcast CEO Brian Roberts previously expressed interest in buying Disney’s Hulu stake if it was put up for sale.
Paramount Global ended 2022 with a total of 77 million global direct-to-consumer subscribers. Of that total, Paramount+ accounted for nearly 56 million subscribers, including 9.9 million added during the quarter.
DTC revenue climbed 30% year over year to $1.396 billion, including $936 million in subscription revenue and $460 million in advertising revenue. However, the segment’s operating loss widened to $575 million, “reflecting investments in content and international expansion,” the company said in its earnings release.
Paramount didn’t provide average revenue per user figures in its latest earnings report, but MoffettNathanson analysts estimate Paramount+ has a global ARPU of $5.25, domestic ARPU of $7.75 and international ARPU of $1.51.
“We are now at the point where we are getting to scale with streaming, generating over $5.5 billion in annual revenue on a run rate basis as we exit Q4,” Paramount Global CEO Bob Bakish told analysts during the company’s earnings call. “Since day one, we have executed against a plan to build a profitable streaming business, one that achieves TV media-like margins.” He said 2023 was the year of “peak investment.”
Chief Financial Officer Naveen Chopra said the previously announced integration of Showtime into Paramount+ will officially launch in the third quarter. The combination will result in an impairment charge of up to $1.5 billion in the first quarter and generate approximately $700 million in future annual expense savings.
As part of the move, the top tier of Paramount+ will rise to $11.99 per month, up from $9.99. The cheaper, ad-supported Essentials tier, which will not include Showtime, will increase to $5.99 from $4.99 per month. Consumers who already pay for the Paramount+/Showtime bundle will not be affected by this price increase.
Starting in the first quarter of 2023, Paramount will no longer report its total number of DTC subscribers, but will continue to provide subscriber and revenue metrics for Paramount+. The company is targeting over $9 billion in DTC revenue in 2024.
Warner Bros. Discovery now boasts a total of 96.1 million direct-to-consumer subscribers across HBO Max and Discovery+ after adding 1.1 million subscribers during its fourth quarter, helped in part by the relaunch of HBO Max on Amazon Channels in December.
The DTC division posted an operating loss of $217 million, a $511 million year-over-year improvement, on revenue of $2.45 billion. Average revenue per user for the DTC business globally was $7.58, with domestic ARPU at $10.83 and international ARPU at $3.71.
“Last year was a year of restructuring, 2023 will be a year of building,” Warner Bros. Discovery CEO David Zaslav told analysts on the company’s earnings call. “We have a great hand and we’re doing a lot right. That said, there’s still more that we need to get right and we are hard at work.”
The company raised the price of HBO Max for the first time in January, with the cost of its ad-free subscription increasing to $15.99 per month. Additionally, Warner will launch a combined, ad-supported offering of HBO Max and Discovery+, which it plans to roll out during an event on April 12. It will also continue to offer a standalone version of the lower-cost Discovery+ service and introduce its own FAST service this year.
Looking ahead, Chief Financial Officer Gunnar Weidenfels said the company expects $4 billion in cost savings in 2024 tied to the WarnerMedia merger, double its original estimate. The DTC segment currently remains on track to break even in the U.S. in 2024 and hit $1 billion of profitability globally in 2025.
Peacock, which has surpassed 20 million subscribers, added 5 million net paid subscribers in the U.S. during the fourth quarter, fueled by live sports and its recent films and originals, Comcast said in its earnings release. It marks the best quarterly result since the streaming service’s launch in 2020.
But Peacock posted a loss of $978 million in the fourth quarter, widening from a loss of $559 million in the prior year period, reflecting the cost of new content. Peacock’s revenue for the quarter climbed to $660 million from $335 million during the same period last year. For the full year, Peacock revenue nearly tripled from $778 million to $2.1 billion, while its losses amounted to $2.5 billion.
The company noted that Peacock continues to see “positive trends” in ARPU but didn’t provide specific figures for the quarter. NBCUniversal CEO Jeff Shell told CNBC in October that Peacock was “doing an ARPU of close to $10” on its paid subscribers.
During the company’s earnings call, Comcast president Michael Cavanagh said Peacock’s losses are expected to peak at around $3 billion in 2023.
“We could not be more positive about our trajectory so far. We’re right where we expected to be as far as investment, and we’re well above where we expected to be as far as paid subs,” Shell added during the call. “We will hit our peak spend this year and then improved steadily from there.”
Lucas Manfredi is a TV Business reporter with TheWrap. He has a Bachelor of Science in Television-Radio from Ithaca College. He can be reached at firstname.lastname@example.org.