Wall Street is focused on streaming. Its future is uncertain

There’s a love affair on Wall Street between investors and streaming.

The romance began about a decade ago when consumers began ditching cable TV bundles en masse in favor of direct-to-consumer streaming apps. But while investors were once obsessed with subscriber growth and rewarded companies that could expand their consumer reach, their focus has now shifted toward profitability.

To meet this new expectation, streaming companies have raised prices for their services, cracked down on password sharing, and moved into ad-supported space. It also caused something like paramount skydance seek the acquisition of warner bros discovery Now you can compete with a rich content library and top streaming service, HBO Max.

Streaming continues to boost media stocks, especially quarterly profits, but it’s not clear if or when it will start boosting profits for smaller companies.

“Is streaming a good business?” Robert Fishman, senior research analyst at MoffettNathanson, wrote in a March research note to investors. “We have asked and debated this important question for years and determined that the answer is yes, albeit only for large enough services.”

For traditional media companies, streaming still cannot fully replace linear TV profits and advertising revenue. Of course, for companies like WBD, Paramount, and their peers, both of these metrics are declining.

In response, streamers have significantly increased subscription prices for consumers, raising questions about where the ceiling for streaming costs lies. Between higher prices and the sheer number of services required to access all the content, consumers are starting to balk.

Still, this continued decline in linear TV has investors clinging to streaming as a bright spot, especially for companies that make money from streaming. disney is one of the most stable of legacy media companies when it comes to its profitable streaming business, while Paramount and WBD have posted profitable quarters. comcast’s Peacock is cutting losses.

“No one reports subnumbers anymore in streaming because now it’s all about profitability,” Doug Kreutz, senior research analyst at Cowen, told CNBC. “And that’s the standard by which these businesses are judged: Can we get to 10% operating margin? Can we get to 15%? Can we get to 20%? Can we get to 25%? How far can we get to it?” Netflix teeth? “

Netflix reported an operating margin of 29.5% in 2025. On the other hand, Disney, for example, has guided investors to expect an operating profit margin of 10% for its direct-to-consumer business in fiscal 2026.

“This is a big question mark facing all these companies,” Kreutz added. “There was a linear business that was very profitable, and that’s gone. Will the streaming business ever be that profitable?”

The leader in this field is undisputed.

Netflix was early to get into the streaming game, winning over many cord cutters with its online service, which is a significantly cheaper alternative to expensive cable packages. The streaming giant has since expanded its library through deals with Hollywood studios and forays into original content.

Being early in this space meant a huge audience for Netflix. In January, the company announced that it had 325 million paying customers worldwide.

“Given the global scale, the ability to spread content spending and other fixed streaming costs across a much larger subscriber base provides more meaningful streaming revenue opportunities,” Fishman wrote. “No other streamer can match Netflix in that regard.”

In the eyes of Wall Street, Netflix is ​​the gold standard. But competition for viewership has intensified and now includes YouTube, TikTok and other social media, as well as live events and gaming, all competing for consumers’ time.

And even industry leaders are not immune to the challenges of the streaming business.

In 2022, Netflix reported its first quarterly subscriber decline in more than a decade, pushing down its stock price. Media giants responded with a series of changes to their business models, most notably adding cheaper ad-supported tiers.

Netflix will no longer report quarterly subscriber numbers, a move Disney is making as the industry once again focuses on profits. (Disney also discontinued revenue and operating profit breakdowns for other parts of its entertainment business, including linear television.)

But analysts agree that comparing Netflix to traditional media players is not quite the same. After all, Disney, Comcast, Warner Bros., and Paramount are more than just streamers. These companies still have linear TV operations and strong theater divisions. Others own parts of even more lucrative empires, such as merchandising, theme parks, hotels, and cruise lines.

It’s only recently that Netflix has branched out from a content-only strategy and launched its own merchandising and live events business.

“They don’t have the power to offset the decline of legacy media,” said Alicia Reese, senior vice president of equity research at Wedbush. “They don’t have to worry about the theatrical stuff.”

As a result, traditional media companies often grow in size compared to what non-traditional technology companies have built in the streaming space.

Both Netflix and traditional media companies have increased prices on their streaming platforms over the last year to increase revenue and justify high content spending.

While consumers have lamented the hikes and seen their previously rented accounts locked out of password-sharing crackdowns, Wall Street has applauded the measures.

“While we believe Netflix is ​​poised for significant global advertising growth, recent price increases could significantly boost profitability this year,” Reese said in a research note published Friday.

Netflix is ​​scheduled to report quarterly earnings on Thursday, weeks after announcing further price increases across its subscription tiers, including its cheapest ad-supported plan.

“While Netflix has consistently increased prices across its tiers, our analysis shows that its U.S. revenue per streaming hour is among the lowest among its peers, suggesting further price increases are possible,” Citizens analyst Matthew Condon wrote in a research note last month.

Most streamers offer several plans, ranging from cheap ad-supported options to ad-free standard services to higher-priced, high-quality versions.

To ease the price burden, streamers have begun offering bundles of their services at discounted prices, further suggesting they may be finding the limit for their customers.

The difference between ad- and ad-free pricing varies by streamer, but ad-supported services typically range from $7.99 per month to $12.99 per month, and premium subscriptions range from $13.99 per month to $26.99 per month. These prices are often set based on the amount of content available in a particular library and the amount that streamer pays to produce and license content for the service.

“I think we’ll continue to see price increases similar to what Netflix has been doing,” Kreutz said. “We’re going to look at how sticky the service becomes if prices continue to rise.”

Advertising has long been part of television’s business model. Even when cable TV bundle prices skyrocketed before the advent of streaming, advertising provided a cushion.

However, when it comes to streaming, there has been a recent push across the ecosystem for consumers to opt for ad-supported plans.

Netflix, which has long resisted advertising, introduced ad slots in November 2022, then scrapped its cheapest basic plan shortly after, encouraging customers to watch with commercials.

Former Disney CEO Bob Iger said on a previous investor call that the company is trying to drive customers to ad-supported plans. And by the 2023 upfront presentation the industry pitches to advertisers each year, streaming has taken center stage.

The economic situation supports this. Netflix reported that advertising revenue in 2025 exceeded $1.5 billion, or approximately 3% of its total revenue for the year. It is expected to double this year.

“We’re on track and the opportunities ahead are tremendous,” Netflix co-CEO Greg Peters said during an earnings call in January.

In the report’s subsequent earnings call, analysts agreed that while Netflix’s ad revenue growth was slow, it provided more insight from the company and helped them understand how it fits into its business.

By comparison, while traditional media peers were late to the streaming game, they were often faster than Netflix when it came to developing advertising plans. Disney’s Hulu, Paramount+, and Peacock have offered these options from the beginning. HBO Max launched its advertising plan in 2021, and Disney+ joined Netflix in late 2022.

This could help accelerate your path to meaningful streaming profits.

But the advertising environment has generally been difficult for media companies to measure. Linear TV’s advertising revenue has fallen sharply in recent years. like a technology company google and meta Facebook continues to hog the lion’s share of advertising dollars. And while streaming is an important source of increased advertising revenue for media companies, it has yet to reach the revenue that traditional television once did.