Analyst sees NBCU, ViacomCBS struggling for streaming scale

MoffettNathanson analyst Michael Nathanson kicked of The StreamTV Show with an overview of the streaming industry. (StreamTV Show)

NBCUniversal and ViacomCBS may eventually find themselves on the outside looking in as the subscription streaming video industry continues to grow.

That’s according to MoffettNathanson analyst Michael Nathanson, who kicked off The StreamTV Show with a forward-looking assessment of which major streamers have the best chance at future success. He based his analysis on criteria including domestic scale; international opportunity; strong brands and original IP; and a “balance sheet and a stomach for investments.”

Assuming that both the Amazon-MGM and Discovery-WarnerMedia deals go through in 2022, he said that the clear winners will be Netflix, Disney, Amazon and Warner Bros Discovery while AMC Networks will have success, albeit on a more niche level. But he said NBCUniversal and ViacomCBS may have trouble scaling in the new streaming world.

Nathanson said that NBCUniversal and ViacomCBS currently drive higher ARPUs within their linear businesses than with their streaming services.

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“Those two companies in particular have a very tough hand as people cut the cord and migrate to streaming. They’ll not be able to replicate their linear ARPUs,” he said, pointing out that WarnerMedia and Fox are also somewhat stressed on streaming ARPUs versus linear.

However, NBCU, ViacomCBS, WarnerMedia and Fox all either have or are building strong positions in ad-supported streaming and that opportunity could be on track to grow substantially over the next four years. MoffettNathanson estimated the U.S. AVOD market will grow from $4 billion in 2020 to almost $20 billion in 2025.

“We see this as a market for explosive growth going forward. Everyone wants to talk about streaming with SVOD, but we think AVOD is probably a much better opportunity that’s underappreciated today,” Nathanson said.

Many hybrid subscription/ad-based services like Discovery+ and Paramount+ have been getting higher overall ARPUs from their ad-supported products. Nathanson also said that services like Hulu, Discovery+ and Peacock have all been using advertising to help offset their inability to charge a higher subscription prices and called it a “real trend” that more services will be taking advantage of.