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All major studios will reach D2C profitability within 18 months, predicts Ampere 

All the major studios will have found a path to direct-to-consumer (D2C) profitability within the next 18 months, according to Ampere Analysis.

Guy Bisson

Disney will be the first of the major studio groups (after Netflix) to hit the milestone, said the UK-based research firm, predicting that it could be turning a profit by the first quarter of 2024, a full two quarters ahead of its disclosed timeline.

Max owner Warner Bros Discovery will be a “close second,” hitting profitability by the third quarter of 2024, while Paramount Global (Paramount+, Pluto TV) and NBCUniversal (Peacock) will achieve profitability by the first quarter of 2025.

Wall Street has soured on the economics of streaming over the past 18 months as the aforementioned studio groups have lost billions building direct-to-consumer (D2C) services to rival Netflix.

All have undergone massive restructuring and job cuts over the past 12 months as they position themselves for the future, in addition to embracing ad-supported streaming models.

“Not only have all the major studio streamers now laid the groundwork for profitability in relatively short order, but they all also look likely to turn streaming direct into significant sources of profit,” said Ampere.

The Guy Bisson-led company said that, by 2028, studios will earn between US$1bn and US$2bn EBITDA [earnings before interest, taxes and depreciation] a year from streaming based on their current market footprints alone.

Disney’s streaming operation will be the most profitable by 2028, with US$1.9bn in annual EBITDA, followed by Warner Bros Discovery (US$1.7bn), Paramount Global (US$1.1bn) and NBCU’s US-based streamer Peacock (US$700m). Netflix had an annual net income of US$4.5bn in 2022.

“Additional geographic expansion would lead to even more upside,” said Ampere, adding that ad-supported streaming represents a “wild card opportunity” that could yield “significantly” more growth than is forecasted in its current projections.

The report does not offer predictions on the path to profitability for Apple and Amazon. However, revenue from streaming makes up a much smaller piece of their businesses, and neither has publicly made statements of intent about achieving D2C profitability.

Bisson, who serves as executive director of Ampere, said the analysis indicates that streaming is “not a broken business model but an important revamp of an existing content exploitation window.” It may also lead to an even greater focus on the theatrical model and content licensing.

“Understanding that this model is on the point of consistent and notable profitability is crucial as the ability of streaming to continue driving content origination and investment has wide implications for the creative sector. Additionally, with studios now able to position streaming correctly as a profit-making direct subscription window that is complimentary to theatrical exhibition, transactional and free television, sectors that had previously been deprioritised should also see a boost. The rationalisation of streaming is already seeing renewed support among studios for the theatrical window and revisiting of the content licensing model.”

Achieving profitability will change the conversation around streaming, which will boost investor confidence in the economic models underlying the D2C business, said Ampere. And after a grueling year for almost all players in the content production ecosystem, Ampere’s prediction will come as a ray of much-needed light at the end of a long tunnel.

“The cost rationalisation of the last 12 months has now positioned the industry for genuine streaming profitability in relatively short order. Passing that milestone will impact multiple windows within the entertainment value chain” added Bisson.

“It will enable a return to flexibility and experimentation and a realisation that existing models are already in place to fully exploit studio output when streaming direct takes its rightful place as one window in the broader value chain.”

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