Legacy media is facing a two-pronged conundrum: TV networks are in decline as a dismal ad environment drags on revenue. In the meantime, streaming remains unprofitable for the majority of players as costs rise and subscriber growth stalls.
Most recently, Paramount (PARA) reported linear ad revenue slumped 15% year over year in Q4, steeper than the 12% drop expected by analysts and also worse than the 14% drag seen in the third quarter.
Warner Bros. Discovery (WBD), Disney (DIS), and Comcast (CMCSA) also saw ad revenue in their traditional broadcast and cable businesses slump this earnings season.
It's a tough spot for media companies, which have invested in expensive streaming endeavors amid the mass exodus of pay TV consumers.
Prior to the cord-cutting phenomenon, linear advertising and cable affiliate fees had consistently boosted revenues. But as ad buyers now flee traditional TV channels in favor of digital options like streaming, companies are beginning to realize that they may never see the same level of returns.
Paramount was recently put on "credit watch negative" by ratings agency S&P Global, which cited weak operating free cash flow trends amid the ongoing deterioration of linear TV and subsequent shift to streaming.
S&P argued margins and cash flows generated by streaming businesses, which are replacing the linear TV segment, will be lower in comparison due to "greater required content spending, higher technology investments, and higher marketing and subscriber acquisition costs."
Paramount's cash flow declines "have been worse than its industry peers because of its smaller scale, less business diversification, and slower direct to consumer ramp up," wrote S&P Global Ratings director Jawad Hussain.
But Hussain also highlighted that this is an industry-wide problem, writing, "Paramount is not the only media company that has experienced weakened free cash flows as it launches and grows its streaming service."
Adding on to financial pressures? The streaming boom may be over.
"The headlines have been unavoidable suggesting that the boom times are over and streaming video is in a new phase of sobriety," subscription analytics platform Antenna wrote in its quarterly "State of Subscriptions" report published on Tuesday.
Antenna revealed that subscribers to premium subscription services grew at their slowest pace since before the pandemic began, rising just 10.1% compared to the 21.6% seen in 2022.
On top of slowing growth, churn — or subscribers canceling their streaming plans — has nearly tripled since 2019 with 140.5 million cancellations in 2023, the largest drop in subscribers over the last five years.
As consumer sign-ups slow, there's increased pressure to turn profits.
Media giants have enacted mass layoffs and slashed billions of dollars' worth of costs. They rolled out ad-supported tiers, bundled their offerings, and raised the monthly prices of their respective subscription plans.
More recently, new "skinny bundles" have emerged as competitors team up to build more scale, suggesting greater turmoil ahead for the industry's status quo.
Despite all of those efforts, streaming profitability still has a long way to go. Virtually all media companies continue to lose money on that business, with the exception of Netflix and very recently Warner Bros. Discovery.
But even WBD's streaming turnaround wasn't enough to lift earnings in the fourth quarter, further highlighting the struggle of legacy media's balancing act. The company still reported a miss on both the top and bottom lines, dragged down by a drop in networks revenue and the ad market plummet. Its stock is down over 25% so far this year.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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