Paramount closed its Warner Bros. Discovery deal Tuesday. The new company, Skydance, now ranks ahead of Netflix in U.S. streaming subscriptions.
So you’re telling me there’s a chance?
Yes, but growing profit is the new scoreboard, and Netflix is the clear leader.
Let's break it down into 4 big questions:
1) Who has the most subscriptions?
2) Who's actually making money?
3) How did ad tiers change the game?
4) Can Skydance catch Netflix?
Who has the most subscriptions?
Streaming subscriptions (U.S.)(Kagan):
1) Disney - 143.6M
2) Paramount + WarnerBros. Discovery - 97.1M
3) Netflix - 86.1M
4) Peacock - 48.0M
5) Apple TV - 15.1M
Keep in mind: Disney and Skydance add up several apps. A home with the Disney bundle counts three times. Netflix is the largest single service.
Fastest growth (YoY):
1) Peacock - ↑ 17%
2) Paramount + WarnerBros. Discovery - ↑ 12%
3) Disney - ↑ 9%
4) Netflix - ↑ 5%
5) Apple TV - ↑ 0.2%
Total streaming subscriptions (Kagan):
1) 2011- 26M
2) 2016- 117M (↑ 356%)
3) 2021- 388M (↑ 232%)
4) 2026- 492M (↑ 27%)
As we discussed last week, the overall streaming subscription market is showing a similar trend. The land grab is over.
% change since 2021:
1) Total subscriptions - ↑ 27%
2) Households with a streaming subscription - ↑ 15%
3) Subscriptions/Household - ↑ 10%
Skydance’s 97M is lower than it looks because most Max subscribers already have Paramount+ (59%), and over half of Paramount+ subscribers already have Max (54%). Netflix doesn’t have that problem: it’s the service nearly everyone keeps, no matter what else they subscribe to.
Who's actually making money?
Streaming profits (profit margin)(Owl&Co):
1) Netflix - $4.2B (34%)
2) YouTube - $2.4B (14%)
3) Paramount + WarnerBros. Discovery - $900M (17%)
4) Amazon - $800M (7%)
5) Disney - $700M (9%)
6) Peacock - $200M (11%)
Bottom line: Netflix earned 6X Disney's streaming profit.
How did ad tiers change the game?
Total streaming revenue (Kagan):
1) 2010 - $810M
2) 2015 - $7B (↑ 762%)
3) 2020 - $26B (↑ 279%)
4) 2025 - $63B (↑ 138%)
5) 2030P - $91B (↑ 44%)
Ad share of total revenue:
1) 2010 - 1%
2) 2015 - 9%
3) 2020 - 9%
4) 2025 - 15%
5) 2030P - 20%
U.S. ad-supported subscribers (Activate):
1) Disney - 55M (30%)
2) Prime Video - 49M (27%)
3) Peacock - 34M (19%)
4) Paramount+ & HBO Max - 26M (14%)
5) Netflix - 17M (9%)
Why it matters: When you can't add homes, you earn more per home. Ads are the second paycheck.
Between the lines: Netflix has the smallest ad audience here. That's room to grow.
Can Skydance catch Netflix?
Merging Paramount and WarnerBros. Discovery into a single company (Skydance) will certainly create scale, but it will face several challenges in catching Netflix.
Skydance challenges:
1) Shrinking linear business
2) Massive debt
3) Low streaming attention
4) Most ad money still from linear
This Owl&Co chart highlights the challenge for linear natives: competing with Netflix is tough when linear still drives their economics.
The new combination accounts for 7% of streaming time, ranking them sixth.
