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How EY can help
2. AI is ready for its close-up
The spotlight is on AI across sectors in 2025, as companies look to broaden early AI adoption into mainstream application. Traditional AI uses, including the automation of front- and back-office processes and transactions, remain high priorities for cost-conscious executives, particularly across finance, legal, IT and customer support organizations. However, the rapid development and commercialization of GenAI will drive the action in 2025.
Companies will double-down on GenAI to accelerate content production, facilitate more efficient content distribution, scale personalized marketing efforts and bolster monetization. As a critical first step, IT leaders will need to organize and synthesize their vast stores of data to enable AI applications. As data powerhouses, companies are uniquely positioned to monetize their data with big tech players to train large language models (LLMs).
As AI adoption gains momentum across the industry and companies seek to maximize their AI advantage, they’ll also need to establish proper risk governance and controls, including fair use, safety, copyright norms and talent compensation. With a keen eye on the bottom line, executives will push AI pilot project teams to prove ROI before broad deployment.
3. Are we there yet? The journey to sustainable streaming profitability
If this year marked the turning point when major streaming services shifted from reporting significant quarterly losses to breaking even or better, then performance in 2025 will confirm whether the path to DTC profitability is secure. In the coming year, streaming players striving to achieve industry-leading financial metrics (25%+ EBITDA margins, robust free cash flow generation) will build on the operational and tactical moves they deployed with success in 2024. Additionally, some will pursue more strategic solutions to reach their objectives.
Several ingredients contributed to the impressive financial turnaround for DTC segments of companies. These included growth in advertising sales, price increases, creative bundling (with streaming peers, MVPDs and other partners), as well as moderation in content spending and disciplined control of operating expenses. Taken together, these actions drove incremental revenue and significantly reduced costs.
Looking ahead, leaders must assess their position in the DTC market to determine if they can achieve the winning formula for sustainable and growing profits – namely, domestic and international subscriber scale, low churn and the financial wherewithal to deliver to consumers a compelling programming line-up that includes live events and sports. Streaming services with these attributes enjoy the broad consumer reach and strong engagement that appeal to marketers, fortifying the dual revenue stream model comprised of subscription fees and advertising.
The critical question in 2025 will be: how many of these scaled services can co-exist? M&E companies that do not see a way to compete with top tier players will need to move more aggressively to explore some form of streaming consolidation – either via joint venture or through outright M&A. Any form of consolidation will prove difficult to execute; however, the potential benefits are meaningful. Increasing subscribers, accelerating advertising sales, and eliminating duplicative costs and infrastructure are all critical milestones on the road to DTC profitability.