This year, major streaming competitors to Netflix will collectively post over $10 billion in operating losses, according to Morgan Stanley.
“Streaming growth is slowing,” writes Benjamin Swinburne, media analyst at Morgan Stanley, in a note on Monday. ”We see 2023 industry net adds at roughly half the 2021 pace. Capital intensity has increased significantly, and content asset turnover and returns have fallen.”
Netflix will be the only major streamer to post positive operating income, estimated to be $5.5 billion for 2022. By way of comparison, Disney+ is projected to have a 2022 operating loss of $3.8 billion; NBC's Peacock's $2.5 billion, Warner Bros. Discovery (all streamers), $2.22 billion, and Paramount (all streaming), $1.84 billion.
Much of this comes from rising content costs -- and overall “streaming support costs” he says, now totaling under $30 billion. “Even best-in-class Netflix has not been able to leverage its content assets in several years,” he writes.
Morgan Stanley estimates major streamers are spending over “$25 billion a year on marketing, technology, and distribution costs that could be meaningfully reduced through bundling or true corporate consolidation.”
An advertising slowdown, which is already having some near term effects on the streaming business, will continue for much of 2023.
“We have seen the beginning of the TV ad market deterioration associated with the broader macro slowdown, suggesting we are two to three quarters away from a trough.”
New budding advertising options from Netflix and Disney+ will be a factor going forward in this soft marketplace.
Swinburne says: “We see the launch of Netflix and Disney+ ad tiers will create incremental pressure on existing ad platforms and keeps us underweight on Roku and Paramount.”