“Companies have to be transparent in order to succeed and find support from their investors,” analyst Sarah Henschel says
Earnings season can be a bit boring. Not this time.
The latest round stood out because several tech and media giants — including Disney, Amazon and Alphabet, Google’s parent company — shared surprising updates about their businesses. Other companies raised eyebrows for what they didn’t share.
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“As competition increases in the streaming space, companies are revealing more behind their successes and/or losses that may have been more vague in the past,” Sarah Henschel, an analyst with IHS Markit, said. “With more [entering] the streaming game, companies have to be transparent in order to succeed and find support from their investors.”
To recap, here are three eye-popping surprises of this earnings season:
YouTube: the cash cow
Let’s start with YouTube. The Google-owned video company — for the first time ever — gave investors a peak behind the curtain, revealing it pulled in $4.72 billion during Q4. For all of 2019, YouTube’s revenue topped $15 billion, an increase of 36% from the year prior. This had been a figure Google kept close to the vest for years, leaving analysts to guesstimate just how big the internet’s biggest video site actually is.
Some may have looked at the disclosure cynically, as a potential distraction from Google narrowly missing Wall Street’s revenue estimates for Q4. But even if that is the case, the disclosure removed all doubt YouTube, if it were a standalone company, would be an entertainment titan. Netflix, for comparison, reported about $20 billion in sales last year and carries a $168 billion valuation.
“The headline of earnings was about transparency with Google’s YouTube,” Wedbush analyst Dan Ives said, calling it “a major step forward that highlights the strength and profitability of this golden jewel.”
Amazon makes unexpected reveal
At the same time, Ives pointed out Amazon’s own “eye-popping” Prime memberships hit 150 million by the end of 2019. This was only the second time Amazon had shared its number of Prime members, and the first update since early 2018, when membership hit 100 million. While Amazon didn’t share how many of those customers routinely watch Prime Video content, new data from Ampere Analysis estimated 42.2 million members watch its shows — indicating Prime members aren’t necessarily signing up just to watch “Fleabag” or “The Marvelous Mrs. Maisel.”
Disney+ outpaces Wall Street
The third standout revelation from Q4 earnings came from Disney. It wasn’t that Disney CEO Bob Iger shared how many subscribers Disney+ pulled in during its first few months; that was expected. But the number ended up topping an already bullish estimate from Wall Street of about 25 million, with Disney reporting it had 28.6 million paying subscribers by the end of January. Without counting customers on 12-month free subscriptions thanks to Verizon, Disney is already about halfway to Netflix’s 61 million domestic subscribers.
Those three surprises made for a distinct earnings season, and YouTube and Disney, in particular, helped add more tiles to the post-TV mosaic.
Henschel said being more transparent with subscriber growth and the overall health of their video businesses is important “because it both encourages transparency in streaming and therefore allows the industry to understand what works and what doesn’t. The industry is able to learn as a collective rather than continue to test what works in silos.”
Still, not everyone played along. One company that conspicuously didn’t share streaming data: Apple.
The $1.4 trillion company launched its Apple TV+ streaming service back in November, right around when Disney+ debuted, yet Apple didn’t have much to say about its performance so far. On the company’s earning’s call, Apple chief Tim Cook said it was off to a “rousing start” — but declined to share any info on its subscriber count. That may be because, as Apple CFO Luca Maestri said later on the same call, Apple TV+ “didn’t have a material impact” on its holiday revenue.
The absence of a subscriber update, compounded by Maestri’s comment, left investors and analysts to speculate Apple TV+ isn’t off to as rousing a start as the tech giant wants you to believe. Part of this could be that Apple TV+ simply doesn’t have enough content to compete on the same scale as Disney and Netflix.
“There’s not much there there,” Bruce Leichtman, president of Leichtman Research Group, said about Apple’s muddled streaming launch. “It helps them get a foot in video streaming, allows them to understand the space a little more, but does this experiment add much value to a trillion-dollar company? No.”
Facebook decided against going the Google route by declining to give investors a look at Instagram’s sales performance — something shareholders and analysts have wait on for years. From strictly a stock performance standpoint, it might have done enough to keep investors from focusing on Facebook’s declining — yet still remarkable — growth rate. (Facebook’s share price, trading at its all-time high of about $223 per share heading into earnings, before dipping a few points post-earnings.)
Those let down by non-update from Facebook didn’t have to wait long, though, with a Bloomberg report coming out only days later that Instagram pulled in $20 billion in revenue last year. It was fitting, considering this earnings season was characterized by major reveals and surprises.
Trey Williams and Tim Baysinger contributed to this report.