After Tough Financial Quarter, Chicken Soup for the Soul Entertainment Streamers Might See Financial Pullbacks
Chicken Soup for the Soul Entertainment (CSSE) has hit something of a wall. The company reported its second quarter 2023 earnings this week, and while total revenue was up year-over-year, it fell well short of Wall Street expectations. The company’s stock price has taken a beating, falling to $0.88 per share in after-hours trading on Monday amidst news that it had absorbed a net loss of $43.7 million during the quarter.
The numbers suggest that CSSE is having a tougher time digesting last year's purchase of Redbox than anticipated. Both CEO Bill Rouhana and CFO Jason Meier said during their conference call to discuss the report with analysts and investors that the company planned to “streamline” aspects of its businesses to help boost revenue flows, which means cuts could be coming to its streaming platforms Redbox and Crackle.
Redbox and Crackle are both free, ad-supported streaming platforms, though Redbox does offer a transactional video-on-demand (TVOD) platform where users can rent movies digitally. The playbook for other major streaming providers, as they attempt to search for profitability, is to incorporate ads with their content, as well as make cuts to shows that users aren’t watching frequently enough.
Since Redbox and Crackle are both ad-supported already, that would seemingly eliminate one option the company has to further monetize its users. But Rouhana did volunteer that the company is looking for ways to further monetize some of its free ad-supported TV (FAST) channels that come from outside partners.
“We’ve increased our FAST platform,” he said. “We continue to scale that service and [add] channels. However, some of the third-party FAST channels don’t meet our revenue thresholds, and we’re insisting that they optimize those channels for profitability.”
“Optimize for profitability” could well mean that those channels either increase their ad load or face being dropped from CSSE’s streaming lineup. It could also mean that users start to see different types of ads on the service, including shoppable ads like the competing free streaming service The Roku Channel has incorporated recently.
CSSE’s efforts to streamline and optimize could also mean content cuts are on their way for both of its streaming platforms. That’s one tactic Warner Bros. Discovery used to much consternation last year, but its recent financial results have seemed to bear out the logic. Disney and Paramount have made high-profile cuts to their streaming libraries as well, helping to decrease back-end costs by removing titles that don’t generate much traffic.
Crackle could feel the sting of cuts more deeply, as it offers original series that are much more expensive to produce than an already-finished show that CSSE pays a licensing fee to stream. The company announced several original titles gearing up for production for Crackle in May, but those may have to be put on hold now.
Users may end up noting more changes to physical Redbox kiosks than to the streaming side of CSSE’s business initially. But if the company cannot improve its financial outlook soon, it may start making bigger moves to grow revenues and cut down on losses.
Crackle
Crackle is a free video streaming service that includes on-demand access to movies and TV Shows.