Higher interest rates have made technology companies care more about profitability, and less about revenue growth. One area that still remains in the revenue growth mindset (with major losses) is online video streaming.

Netflix has become profitable at scale, but the others (Disney+, Peacock, Paramount+, HBO Max/Discovery) are losing ca $2-4 billion each per year. Amazon is spending a lot (ca $16 billion per year) on content as part of Prime, so understanding its profitability from the outside is difficult.

Disney (ca $80 billion in revenue), Comcast ($103 billion, of which NBCUniversal ca $35 billion) and Paramount/ViacomCBS (ca $30 billion) are not small companies, but investing billions per year in content and customer acquisition is a lot of money. And the corporate DNAs of the large media companies are not suited to big losses like Netflix and Amazon have run for many years, or even significant EBITDA margin pressure.

The other side of building a major direct-to-consumer service (which brings losses), is to license content to one, some or all of the others. Being an ‘arms dealer’. The short-term financial flip would likely be billions (losses go towards zero for streaming service, and license revenue would be hundreds of millions to billions of dollars). The issue is likely the longer-term strategic positioning (can you be a major media company without a direct streaming relationship with consumers?).

As six players are going after each other and five are losing significant money, something is likely to change. Especially as investors, for now, have decided that technology stocks should go up when losses go down.