Are All Streaming Services Losing Money? Netflix Seems To Think So

The battle between media companies with streaming platforms continues to heat up in an all out price war and competition for time spent by consumers.

With companies investing billions of dollars on content, Netflix Inc NFLX used its earnings report to remind investors that it is making money as the streaming leader while others are losing it. 

What Happened: Netflix reported third-quarter revenue and earnings per share for the third quarter that came in ahead of Street estimates, according to data from Benzinga Pro.

After announcing a subscriber gain in the third quarter, Netflix also took time to call out competitors in the streaming market.

“Netflix has higher engagement than any other streamer – with room for growth,” the company said in a statement. “Our competitors are investing heavily to drive subscribers and engagement, but building a large, successful streaming business is hard – we estimate they are all losing money.”  

Netflix estimates that it will have an annual operating profit of $5 billion to $6 billion for fiscal 2022. The company’s competitors will lose a combined $10 billion in 2022, according to Netflix.

Along with tackling its profit advantage over rivals, Netflix also touted the advantages of binge-watching versus a one-episode-per-week format.

“It’s hard to imagine, for example, how a Korean title like ‘Squid Game’ would have become a mega hit globally without the momentum that came from people being able to binge it.”

The comments on rivals for losses and one episode per week did not name any specific company but likely apply  to streaming platforms from The Walt Disney Company DIS, Amazon.com Inc AMZN, Warner Bros. Discovery WBD and others.

Related Link: Here's How Much Netflix's Ad Supported Plan Costs And How It Compares To Rivals 

Why It’s Important: Netflix is launching an ad-supported streaming platform in November, which could bring more subscribers to the company and also distance itself from rivals with a new value add.

One executive said recently that streaming platforms could be forced to keep raising prices.

“Streaming pricing is going to go up,” Paramount Global PARAPARAA CEO Bob Bakish told Yahoo Finance.

In the interview, Bakish mentioned that Netflix and Disney have both announced pricing increases in 2022. Bakish also said that the Paramount+ streaming platform won’t be able to maintain a $9.99 price point for the premium offering forever.

“The priced umbrella on streaming will go up, and we’ll tuck in under that and we will raise prices as well. I can’t tell you exactly when that will happen, but directionally, it’s going to happen for sure.”

Netflix is launching an ad-supported plan in 12 countries in November with a new price point of $6.99. The new price point will put Netflix in better competition with some of the platforms like Paramount+, HBO Max, Hulu, Disney+ and Peacock from Comcast Corporation CMCSA.

New subscriber growth for Netflix in a lower-cost tier could put even more pressure on rivals to decide whether to focus on subscriber gains and losses — or higher prices and potentially less subscribers, but better bottom lines.

Rosenblatt analyst Barton Crockett highlighted the potential for Disney to be a better play on streaming growth with a more targeted approach in the form of an ad-supported plan that launches in December.

“The bigger ad play in 2023 appears to be Disney+, which is making ads standard across its service, and requiring users to switch to a pricier service tier to avoid them,” Crockett said. “Disney seems positioned to have more eyeballs in streaming ad plans than Netflix.”

While the streaming market remains highly competitive, Netflix sees room for growth in the overall sector and by taking market share.

“After a challenging first half, we believe we’re on a path to reaccelerate growth. The key is pleasing members,” Netflix said.

The company said it has a “very large and growing” opportunity ahead and a “long runway for growth.”

NFLX Price Action: Netflix shares were trading down 1.54% at $268.20 Thursday afternoon. 

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