Studios rethink streaming strategy amid Wall Street profitability push

Paramount is making a habit of greenlighting low- to mid-budget films for its streaming service, only to about-face and send them to theaters first.

As the media company and its rivals try to claw their way to higher profits, the strategy could gain traction.

“Smile,” a horror film with a $17 million budget, was supposed to go straight to Paramount+ in 2022, but strong results from test screenings brought the flick to theaters. It generated more than $200 million at the global box office. A sequel is now in the works.

Then this year, “Mean Girls,” a musical film adaptation of the Broadway show and beloved 2004 film of the same name, arrived in theaters from Paramount, after positive responses from test audiences led the company to abandon its straight-to-streaming release. Since it came out on Jan. 12, the $36 million film has tallied $83 million globally, according to data from Comscore.

Paramount’s strategy is largely based on an individual film’s potential performance. But box-office and Wall Street analysts expect other studios will lean into the tactic, as they struggle to profit off of films that don’t get a theatrical release.

In the last five years, traditional media companies have pushed low-budget genre films out of theaters and onto their fledgling streaming platforms to pad their libraries and drive subscriber growth. And for a while, Wall Street rewarded these companies for adding more users each quarter.

Investor sentiment has changed. Now, as linear TV ad revenue shrinks, they want more immediate earnings growth, not the promise of profit in a few years. While Netflix is profitable and largely not involved in theatrical releases, traditional media players like Disney, Universal, Paramount and Warner Bros. Discovery may need to rethink their streaming strategies.

“Studios they can’t just bring stuff to streaming and use those movies as loss…