There's a love affair on Wall Street between investors and streaming.
The romance started about a decade ago when consumers began cutting the cord with cable TV bundles en masse in favor of direct-to-consumer streaming apps. However, where investors were once enamored with subscriber growth, rewarding companies that were able to expand their consumer reach, their attentions have now shifted toward profitability.
To meet this new expectation, streaming companies have raised the prices of their services, cracked down on password sharing and delved into the ad-supported space. It's also sparked the likes of Paramount Skydance to seek out the acquisition of Warner Bros. Discovery for its extensive library of content and top-tier streaming service, HBO Max, in order to compete.
While streaming continues to drive media stocks, especially around quarterly earnings, it's not clear when — or if — it will start driving profits for the smaller players.
"Is streaming a good business?" Robert Fishman, senior research analyst at MoffettNathanson, posed in a March research note to investors. "We raised and debated this critical question over the years leading us to determine the answer is yes, albeit only for those services with sufficient scale."
For legacy media companies, streaming has yet to fully supplant the profits and advertising revenue of linear TV. Of course, both of those metrics have been in decline for companies like WBD, Paramount and its peers.
In response, streamers have largely raised subscription prices for consumers, begging the question of where the ceiling is for streaming costs. Between higher fees and the sheer number of services needed in order to have access to all content, consumers are starting to balk.
Still, with these continuous linear TV declines, investors cling to streaming as a bright spot, especially for companies that have made it profitable. Disney has been among the steadiest of legacy media companies when it comes to a profitable streaming business, but Paramount and WBD have seen profitable quarters and Comcast's Peacock is narrowing losses.
"With streaming no one's reporting sub numbers anymore, because now it's all about profitability," Doug Creutz, senior research analyst at Cowen, told CNBC. "And that's the metric by which these these businesses are being judged. It's, you know, can you get to 10% operating profit? Can you get 15%? Can you get 20%? Can you get 25%? Can you get to where Netflix is?"
Netflix reported operating margin of 29.5% in 2025. Meanwhile, Disney, for example, guided investors to an operating margin for its direct-to-consumer business of 10% in fiscal 2026.
"This is the big question mark that all these companies face," Creutz added. "You had a linear business that was really profitable and it's gone away, and is the streaming business ever going to be that profitable?"
Netflix was early to the streaming game, scooping up a number of cord cutters with its significantly cheaper online alternative to pricey cable packages. The streaming giant has since grown its library through deals with Hollywood's studios and by wading into original content.
Being among the first to the space meant a massive audience for Netflix. In January, the company announced it had reached 325 million global paid customers.
"As we think about global scale, the ability to spread the content spend and other fixed streaming costs over a much larger subscriber base leads to a more meaningful streaming profit opportunity," Fishman wrote. "On that front, no streamer comes close to Netflix."
In the eyes of Wall Street, Netflix is the gold standard. But competition for viewership is growing and now includes YouTube, TikTok, other social media as well as live events and gaming — all jockeying for consumers' time.
And even the industry leader isn't immune to the challenges of the streaming business.
In 2022 Netflix reported its first quarterly subscriber loss in more than a decade, dragging down its stock price. The media giant responded with a series of changes to its business model, most notably the addition of a cheaper, ad-supported tier.
Netflix no longer reports quarterly subscriber counts, and Disney has since followed suit as the industry refocuses on profits. (Disney also stopped breaking down the revenue and operating income for other parts of its entertainment business, including linear TV.)
But analysts agree that the comparison of Netflix to traditional media players isn't exactly apples to apples. After all, Disney, Comcast, Warner Bros. and Paramount aren't just streamers. These companies still have linear TV businesses as well as robust theatrical divisions. And some have other, even more lucrative pieces of their empires, including merchandising, theme parks, hotels and cruise lines.
It's only recently that Netflix has branched out from its content-only strategy to launch its own merchandising and live event businesses.
"They don't have the decline of legacy media to offset," Alicia Reese, senior vice president of equity research at Wedbush. "They don't have theatrical to worry about."
The result is traditional media companies that are often sized up against what a non-traditional tech company has been able to build in the streaming arena.
Both Netflix and traditional media companies have raised prices for their streaming platforms over the last year in an effort to boost revenue and justify high content spending.
While consumers groan at the sight of these price increases and at being locked out of accounts they previously borrowed due to password sharing crackdowns, Wall Street applauds such measures.
"We think Netflix is positioning for substantial growth in global advertising, while its latest price increases could provide a meaningful boost to profitability this year," Reese wrote in a research note published Friday.
Netflix will report its quarterly earnings on Thursday, weeks after announcing yet another a price increase across its subscription tiers, including its cheapest plan with ads.
"While Netflix has consistently raised pricing across tiers, our analysis suggests U.S. revenue per streaming hour is one of the lowest among its peers, suggesting further pricing runway going forward," Matthew Condon, analyst at Citizens, wrote in a research note published last month.
The majority of streamers offer several plans, ranging from a cheaper ad-supported option to an ad-free standard service and then a higher-priced and higher-quality version.
To ease some price burden, streamers have also started to offer bundles of their services at a discount, further suggesting they could be finding customers' limits.
The difference in pricing of the ad-supported and ad-free tiers varies from streamer to streamer, but typically an ad-supported service ranges from $7.99 a month to $12.99 a month and premium subscriptions range from $13.99 a month to $26.99 a month. These prices are often set based on how much content is available in a given library and how much that streamer is paying to produce and license content for its service.
"I think you're going to continue to see price increases similar to what Netflix has been doing," Creutz said. "We're going to find out how sticky services are if price continues to go up."
(extra members cost $7.99/month for ads, $9.99/month for no ads)
Advertising has long been part of the TV business model. Even as cable TV bundle prices soared before the advent of streaming, advertising provided a cushion.
However, for streaming, the push for consumers to opt into ad-supported plans has more recently ramped up across the ecosystem.
Netflix, which had long resisted ads, introduced its ad-tier in November 2022 and shortly after eliminated its cheapest basic plan, pushing customers toward watching with commercials.
Former Disney CEO Bob Iger said in prior investor calls that his company is trying to steer customers toward ad-supported plans. And by 2023's Upfront presentation, the industry's annual pitch to advertisers, streaming took center stage.
The economics bear out: Netflix reported 2025 ad revenue exceeded $1.5 billion, or about 3% of total full-year revenue. That's expected to double this year.
"We're making good progress, and the opportunity ahead of us is massive," Netflix Co-CEO Greg Peters said during the company's earnings call in January.
In post-earnings notes after that report, analysts agreed that while Netflix's ad revenue growth was slow to start, having more insight from the company helped understand how it's incorporated into the business.
While legacy media peers were late to the streaming game by comparison, they were often faster than Netflix to institute ad plans. Disney's Hulu, Paramount+ and Peacock offered these options from their inception. HBO Max launched its ads plan in 2021, while Disney+ joined Netflix in late 2022.
That could help speed up the on ramp to meaningful streaming profits.
In general, though, the advertising landscape has been tricky to measure for media companies. Linear TV ad revenue have been on a precipitous decline in recent years. Tech companies like Google and Meta's Facebook continue to gobble up the lion's share of ad dollars. And while streaming has been a key source of ad revenue growth for media companies, it has yet to stack up to what traditional TV once garnered.
