The 2022 Warner Bros. Discovery (WBD) Merger marked a significant shift in the streaming service market. When the company not only canceled but entirelyremovedWestworldfrom Max, home audiences got their first taste of a trend that continues to reverberate throughout the industry. From Max to Disney+ to Paramount+ and more, streaming companies are dropping series left and right,devastating creators and disappointing fans.
There was a point where streaming services seemed poised to permanently change the industry; but now, given the slew of unexpected cancelations and other extreme cost-cutting measures, it seems the industry has changed them. Amid shifting content, higher prices, and striking creatives in Hollywood, consumers are looking at these companies with greater scrutiny.
Why would a company get rid of programming that was once a driver to their service, especially when they’ve spent so much to make that programming in the first place? Surprisingly, the answer is that it’s more profitable to remove the content, but why? In 2023, which, if any, streaming services are profitable?
Do Streaming Services Make Money?
Starting andmaintaining a streaming serviceis expensive. From content creation to licensing and more, new streaming services require significant investment to even get off the ground. At the start of the streaming boom, this didn’t matter. Companies like Hulu and HBO wanted a piece of the Netflix pie and thus spent millions of dollars on prestige content to bring in customers.
Related:HBO Max: What’s Leaving the Streaming Service After the Warner-Discovery Merger?
None of this is to say streaming services don’t bring in money: they do, but that’s not the same as turning a profit.According to IndieWire, Netflix and Hulu are the only two major streaming services that made a profit by the end of 2022. By contrast, Peacock, Disney+, Max (formerly HBO Max), and Paramount+ reported billions of dollars in losses in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). And these pictures aren’t completely accurate, given that only some of these metrics are shared with the public. Services like Apple TV+ and Prime Video don’t even do that, making it impossible to know their profits and losses.
How Do Streaming Services Recoup Their Losses?
It started with WBD’scancellation ofBatgirldespite the film being near complete. Reports surrounding the cancelation cited several possible reasons for this, including negative test screenings that implied the film threatened the DCEU’s reputation — the latter of which seems suspect considering the company’s continued work with Ezra Miller.
No, what likely happened toBatgirlis what’s been happening throughout the streaming industry: companies see it as more profitable to take tax write-downs on these projects because it’s a safer financial bet. Just look at the slew of content Disneyremoved from Disney+and Hulu in May 2023 to the tune of approximately $1.5 to $1.8 billion in write-downs. Removing content also means companies no longer have to pay out royalties and residuals for those shows and movies, saving them even more money at content creators’ expense.
Related:Why Congress Is Upset at Warner Bros. for Canceling Batgirl
The Future Is FAST
As streamers come to discover that subscriptions alone can’t pay for the type of prestige content audiences crave, they’re moving more and more to a multi-armed model that brings in revenue from multiple sources, just like cable before it.
