They are just now realizing the its extreamly difficult to actually make a profit with a streaming service. Most major ones like hbo max and disney+ lose billions a year. Netflix and hulu are the only ones that have been able to squeeze out a tiny profit.
Do we have concrete evidence that this is true? I find it highly unlikely Disney+ was hemorrhaging money considering all the parents that are indefinitely subbed to D+ for the Disney catalogue.
Unless the original programming like all the Marvel TV shows (which are pretty low quality scripts) and the remakes (which are low quality) really cost that much to make.
Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased 12% to $5.5 billion and operating loss decreased $0.2 billion to $0.7 billion. The decrease in operating loss was due to improved results at Disney+ and ESPN+, partially offset by lower operating income at Hulu.
The improvement at Disney+ was due to higher subscription revenue and a decrease in marketing costs, partially offset by higher programming and production costs and, to a lesser extent, increased technology costs. Higher subscription revenue was attributable to subscriber growth and increases in retail pricing, partially offset by an unfavorable foreign exchange impact. The increase in programming and production costs was due to more content provided on the service.
Improved results at ESPN+ were attributable to growth in subscription revenue due to an increase in retail pricing and subscriber growth.
The decrease in operating income at Hulu was due to higher programming and production costs and lower advertising revenue, partially offset by subscription revenue growth and, to a lesser extent, lower marketing costs. The increase in programming and production costs was attributable to more content provided on the service and an increase in subscriber-based fees for programming the Live TV service, partially offset by a lower average cost mix of SVOD content. Higher subscriber-based fees for programming the Live TV service were due to rate increases and more subscribers. The decrease in advertising revenue resulted from lower impressions, partially offset by higher rates. Subscription revenue growth was due to increases in retail pricing and subscribers.
The problem isn’t so much that it is hard to be profitable. It is that the Movie industry will just keep raising prices of the content until they are barely scraping by. Since there is 9 major streaming services they are effectively a commodity bidding over the media content. So the free market has squeezed the profit out of it.
Of course the streaming services then turn around and try to restore a profit margin by raising the prices. Now the consumers are facing raised prices for a small slice of available media and realizing that this is both expensive and inconvenient.
Even if the consumers keep using the streaming services at a higher price the media companies will notice that they are making a profit again and jack the prices further. The streaming services are basically helpless middlemen.
This is of course why just about ever streaming service is starting to produce first-party content. This is where the money is as they are in control of the price and don’t have to outbid other streaming services.
They are just now realizing the its extreamly difficult to actually make a profit with a streaming service. Most major ones like hbo max and disney+ lose billions a year. Netflix and hulu are the only ones that have been able to squeeze out a tiny profit.
Do we have concrete evidence that this is true? I find it highly unlikely Disney+ was hemorrhaging money considering all the parents that are indefinitely subbed to D+ for the Disney catalogue.
Unless the original programming like all the Marvel TV shows (which are pretty low quality scripts) and the remakes (which are low quality) really cost that much to make.
They should report the losses at earning calls and i think they did. But i am to lazy to look it up.
Direct to consumer media lost $659M in Q1 this year https://thewaltdisneycompany.com/app/uploads/2023/05/q2-fy23-earnings.pdf
They describe in in their filings like this
Direct-to-Consumer Direct-to-Consumer revenues for the quarter increased 12% to $5.5 billion and operating loss decreased $0.2 billion to $0.7 billion. The decrease in operating loss was due to improved results at Disney+ and ESPN+, partially offset by lower operating income at Hulu.
The improvement at Disney+ was due to higher subscription revenue and a decrease in marketing costs, partially offset by higher programming and production costs and, to a lesser extent, increased technology costs. Higher subscription revenue was attributable to subscriber growth and increases in retail pricing, partially offset by an unfavorable foreign exchange impact. The increase in programming and production costs was due to more content provided on the service. Improved results at ESPN+ were attributable to growth in subscription revenue due to an increase in retail pricing and subscriber growth.
The decrease in operating income at Hulu was due to higher programming and production costs and lower advertising revenue, partially offset by subscription revenue growth and, to a lesser extent, lower marketing costs. The increase in programming and production costs was attributable to more content provided on the service and an increase in subscriber-based fees for programming the Live TV service, partially offset by a lower average cost mix of SVOD content. Higher subscriber-based fees for programming the Live TV service were due to rate increases and more subscribers. The decrease in advertising revenue resulted from lower impressions, partially offset by higher rates. Subscription revenue growth was due to increases in retail pricing and subscribers.
The problem isn’t so much that it is hard to be profitable. It is that the Movie industry will just keep raising prices of the content until they are barely scraping by. Since there is 9 major streaming services they are effectively a commodity bidding over the media content. So the free market has squeezed the profit out of it.
Of course the streaming services then turn around and try to restore a profit margin by raising the prices. Now the consumers are facing raised prices for a small slice of available media and realizing that this is both expensive and inconvenient.
Even if the consumers keep using the streaming services at a higher price the media companies will notice that they are making a profit again and jack the prices further. The streaming services are basically helpless middlemen.
This is of course why just about ever streaming service is starting to produce first-party content. This is where the money is as they are in control of the price and don’t have to outbid other streaming services.