Even just a few years ago, many of us naively believed that streaming services would act as constantly-growing libraries of content that we could return to whenever to watch shows at will. Then, last year, Warner Bros. Discovery fired the first big shot in The Great Write-Down. Disney followed suit last month and now says there’s more to come, Variety reports.
Following the removal of shows and movies like Willow, Y: The Last Man, Dollface, and the Mysterious Benedict Society, Disney is expected to incur a content impairment charge of $1.5 billion, meaning that the company can remove that much from its tax sheet. That’s an impossible number to ignore–that’s savings equivalent to a handful of Marvel movies. As a result, Disney is reportedly continuing to review content on both Disney+ and Hulu, and “currently anticipates additional produced content will be removed from its DTC and other platforms, largely during the remainder of its third fiscal quarter.” That will likely equate to about $400 million more in impairment charges related to produced content (primarily meaning scripted television and film).
Since the early days of Netflix creating streaming content for its platform, streaming services have been growing and growing their libraries. So many people have joined streaming services, though, that growth is slowing significantly; there just aren’t as many new customers as there used to be. It’s about retaining existing users and bringing back others that have switched to other services.
A more reliable way to help widen the gap between spend and revenue is to focus on finding ways to reduce costs on the backend. Shelving content that Disney feels costs more than it’s worth means that the company doesn’t have to shell out for residual payments to actors and writers (the latter of whom are currently striking for better pay among other things), and doesn’t have to pay licensing fees to external parties.
Disney CEO Bob Iger said on Disney’s most recent earnings call that he was “confident that we’re on the right path for streaming’s long-term profitability,” and that the company would be “rationalizing the volume of the content we make and what we’re spending.” Iger also expects that Disney will raise the price of its Disney+ service “to better reflect the value of our content offerings.”
We can likely expect more of this type of news coming not just from Warner Bros. Discovery and Disney, but companies like Amazon Prime Video and Netflix, followed by newer options like Peacock and Paramount+ in the coming years as they seek sustainable profit in the face of slowing growth.
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