(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
Probably the wittiest part of Stephen Colbert’s talk show is the introduction to his segment “Meanwhile”, where he builds up an increasingly bizarre metaphor so quickly the listener can barely catch the jokes before he moves on to the next one, all of which is a giant set-up to a segment that covers interesting news stories he didn’t cover in his monologue.
Colbert is onto something, pausing and catching up with the news he missed! After all, there are some stories that I didn’t write about in 2025 that I still want to write about.
For me, that also includes a lot of what I would call “slow burn” stories, a story that didn’t generate a specific news “event”, so it never made this specific (ideally) bi-weekly column. But I kept seeing them throughout 2025, and since I never commented on them, I feel like I should.
So today, I’m clearing out my 2025 notebook. We’ll start with the key chart I saw everywhere in 2025, and I’ll explain it better than any analysis I’ve seen yet. I’ll also touch on the micro-drama hype cycle, the fall of Georgia as a production hub, the boom in theme parks, two companies going bankrupt, and a whole lot more.
But we start with Streaming’s Profit Era.
Most Important Story of the Week – Streaming Enters the Profit Era…Just Not as Profitable As Before
I saw one chart/headline repeatedly in 2025. And instead of just describing where I saw it, why don’t I just list them out. First up, here’s Axios:
And here’s Owl and Co!
And the Wall Street Journal!
And this one is from the start of the year, but it’s from Bloomberg:
Streaming’s profitable now! Rejoice! Well, kind of. A few obvious points stick out:
- Netflix is the most profitable streamer, by far.
- The other streamers (Disney, Paramount, HBO/Max) are mostly profitable now, but again not in Netflix’s league.
- The other streamers also don’t seem to be catching up with Netflix, though I’m not as certain about this.
- Um, we don’t know anything about Apple or Prime Video’s profitability. Some out there assume that means they’re wildly profitable, and let’s just say that I don’t share your optimism.
- Lastly, YouTube makes a ton of money, but as an “ad-supported” video service (AVOD) it’s not on these charts. Some FASTs are somewhat profitable, like the Roku Channel, but others we know less, like Pluto TV or Tubi.
Yes, for those who’ve been with me for a while, ideally, I prefer “free cash flow” as the metric of a company’s profitability, but that’s not really included in business segment reporting, so operating income or some other profitability metric will have to suffice. (Netflix is really the only pure play streamer who can report that.)
One other key note: being “profitable” doesn’t mean being as profitable as before.
Streaming Doesn’t Make As Much Money as Broadcast/Cable, But It’s Global Now
The problem with the above charts is that they don’t underscore the key difference between the streaming era and the previous broadcast and cable era. Specifically…
The streaming TV ecosystem is much less profitable than the traditional TV model. And it will stay that way for the medium-term future.
The must-read Doug Shapiro has written about this before, calculating that in the old TV ecosystem, consumers spent $171 per household, and in the streaming era, that’s down to just $37. Yes, the two numbers will converge, but that $171 likely won’t come back. (With streaming at half of TV viewing, if it doubles, that’s only $74.) CrossScreenMedia provided numbers from MoffettNathanson using “per hour” monetization, and it shows this in action:
To sum up, for an hour of TV watching, the streamers make less money than the cable companies (and associated TV studios) did of old. That’s because consumers own fewer subscriptions, switch streamers more often, and watch fewer ads. That all leads to less revenue and less profit.
(Yes, the previous system was undergirded by local cable monopolies. It wasn’t ideal, but unraveling that system means less money overall flowing to entertainment conglomerates.)
So why, then, does Netflix make so much money? Well, it’s a non-apples-to-apples comparison to the past. Specifically, Netflix is a global TV provider in a way we’ve never really seen before. Netflix expanded to nearly every country around the world, something broadcasters of old just couldn’t easily do because of old broadcast regulations. So, comparing Netflix’s global profits to the traditional entertainment conglomerates, mostly US revenue/profit isn’t really apples to apples.
This idea, though, underscores the key challenge for the traditional streamers like Disney, Paramount and Peacock: how do they catch up globally with Netflix? Sure, Netflix is still the biggest streamer by sheer streaming volume in the US, but the forces driving the higher revenue across the board are Netflix’s global footprint, not just the US. Yes, the traditional streamers need to catch up to Netflix’s 8% share of TV viewing and YouTube’s 12%, but they also need to catch up globally.
Related, this explains why traditional media stocks have been hammered in recent years, whereas Netflix’s is up. Netflix is banking on global growth, and the traditional studios haven’t competed in that realm. It also unfortunately explains why we’ve seen job losses across the Hollywood ecosystem. Less revenue and then less profit means less production, which means fewer jobs.
What To Look for in 2025…
The fun thing about this topic is it also provides some key questions for 2026:
- How do the various growth rates shift? Does Netflix keep its lead, grow it, or shrink it?
- Related, if Netflix were confident they’d keep growing, why buy Warner Bros Discovery? (This question deserves a longer answer.)
- Most of the profitability of 2025 came from content budget cuts in 2023 and 2024. Do those continue or do we see some expansion on budgets with profitability in sight?
- What happens overseas? Specifically, we saw some protectionism of TV and film production in 2025, and they may expand, especially as tariff fights continue.
Almost Most Important Story of the Week – Are Micro-Dramas For Real?
The entertainment industry loves hype cycles, don’t we? One has hardly ended before we leap upon the next. We went from streaming to FAST channels, briefly flirted with the Metaverse, before hopping back to the creator economy and YouTube/TikTok.
And now…micro-dramas!
For those who didn’t see the stories, micro-dramas are short-form videos—and I do mean short, like two to three minutes—streamed on social apps. Users typically rent access to seasons, which can be several dollars per episode after watching the first few for free. (To be honest, I haven’t used the apps, so I may have gotten this wrong.) I read stories hyping micro-dramas all year, but nothing stood out, in terms of a news story, to merit a full write-up, so it’s the perfect topic for this issue.
Whenever something gets a lot of hype, we can lump it into one of four boxes:
- Fraud (meaning it’s all hype and no reality)
- Bubble (meaning it’s real, but too hyped up and the reality makes far less money than the investment)
- Gold Rush (meaning it’s real, but too many players are rushing in simultaneously)
- Genuine Opportunity (meaning real profits can be made, and can support multiple players…)
You can pretty easily think of examples of each for the above. NFTs often turned out to be frauds. Same with the metaverse, which didn’t really exist. Streaming was a bubble, and FASTs were a gold rush.
So…what are micro-dramas?
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