The once skyrocketing streaming business is slowing down, according to an analysis by Steven Cahall of Wells Fargo.
Subscriber growth rates were down in the fourth quarter and will continue to drop through 2025. Similarly revenue increases dampened–a trend that will go forward through 2004, the analyst says.
Looking at subscribers, Cahall says the 12 direct-to-consumer services he tracks added 23 million subscribers in the fourth quarter, a 4% increase. They added 103 million compared to a year ago, a 19% gain. Those increases are smaller than 4% quarter to quarter increase and 25% jumps registered in the third quarter.
During 2021, the streaming services averaged added 38 million subs per quarter.
“This is the second consecutive year of decelerating growth and the lowest level of year-over-year net adds since 2018, when there were fewer streaming platforms,” Cahall says. “We don’t think it’s a surprise to investors that streaming sub growth is slowing as penetration increases.”
Among the individual Disney Plus (including Hotstar) and Starz lost subscribers in the fourth quarter.
Peacock was the fastest growing service in the fourth quarter, up 33% from the prior quarter and 122% from the year before. Paramount Plus was up 21.5% from the third quarter.
Naturally Netflix had the largest market share at 36%, flat from the third quarter but down from a 41% share a year ago. Put together, all of the elements of the Disney bundle also had a 36% share in the fourth quarter. “We think the Disney Plus bundle is delivering solid sub growth for the service and also driving down churn.” he said.
Looking head, Cahall forecasts that streaming subscribers will increase 8.1% in 2024 and 10% in 2025, when there will be 828 million total streaming subscribers. That’s down from Cahall’s previous estimate of 910 million subs in 2025.
From a revenue perspective, DTC services generated $15.2 billion between subscriptions and advertising in the fourth quarter, up 3% from the third quarter and 13% from the previous year.
Netflix accounted for 51% of the revenue generated by DTC services.
For 2022 the DTC business generated $8.8 billion in revenue up 20.5% from 2021.
Cahall expects industry revenue to grow to $68.7 billion in 2023 and $79.3 billion in 2024. ■
