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There have been a lot of change-ups in the TV and movie streaming industry lately. Disney started a massive layoff campaign to make its streaming service, Disney+, more profitable (or, really, profitable at all). And Netflix is switching it up with a crackdown on password sharing. HBO Max and Discovery Plus are merging, too. Speaking of HBO Max, 36 shows available through the platform just straight up disappeared last August. So, what’s the deal here?
Well, it turns out that running a streaming service is pretty expensive.
Last year, Director of Strategy at Parrot Analytics Julia Alexander explained in an interview with Slate: “If you look at Disney, they’ve got $1.1 billion in operating income loss. If you look at Warner Bros. Discovery, they’ve got I believe $3 billion in operating income loss. They’re spending heavily on streaming, but streaming is not a profitable business for them. It’s not going to be profitable for another two, three years.”
For streaming services, their plan is based on making more on average on a customer joining than what they spend to acquire that customer on top of their overall costs of running the platform. The initial investment to start a streaming service usually brings on a lot of debt, but Wall Street has been pretty cool with lending out that money. But now, it’s starting to actually want to see a return on its investment.
Also, there’s another problem – the fact that so many streaming services have popped up. A few years ago, Netflix was dominating the game without any real competition. These days, there are so many streaming services with quality programming that consumers have started to pick and choose which ones they actually want. So, the platforms have had to spend even more money to license better content and create new original content.
This has led to price hikes and new password-sharing rules that have taken us all by surprise. Netflix and HBO-Max are planning on launching some ad-supported tiers to their subscriptions to offset costs, too. A lot of people find this strange because … isn’t the point of all this to avoid watching commercials? Do we have to sit through ads again just for Netflix to put out another season of Big Mouth?