Tag: streaming

“This was the promise of the streaming age: You can have everything, you can have it everywhere, and you can have it all, at once. Subscribe to our platform and you’ll have access to our huge library of “content” forever, on demand, whenever you want it. You want more? Look, it’s right there in the plus sign at the end of the platform’s name. (Why did everyone do that?)
This utopian fantasy was in serious contrast to the old way of watching TV, where you’d sit yourself down to watch your show at the time it aired or you wouldn’t see it at all unless you were lucky enough to catch it in reruns. Once your show was canceled, you couldn’t watch it anymore. We got VHS recorders, and then TiVos, sure, and eventually you could buy a show on tapes or DVDs after it had aired. But these all require intention and planning, an action on the part of the potential audience member. Streaming? That would be easy.

Turns out the utopian fantasy was a fantasy”

…

“The first way that removing a show from a platform saves money is tied up with some of the reasons that the WGA is striking and SAG-AFTRA is considering it: residuals. Production companies pay members of various guilds (like the WGA) a fixed percentage every year if their show is available on a streaming platform. Calculation of the precise rate is byzantine and renegotiated every three years by the guilds, and can range from a pittance to a livable income, depending on the deal that was cut for that show. But it’s a cost that the company incurs, and if they remove the show entirely, the cost is eliminated.

Often, however, shows removed from a platform don’t go away entirely. In the case of Westworld, for instance, Warner Bros. Discovery removed the show from its platform (now called Max) but licensed it to free, ad-supported channels operated by Roku and Tubi. That means you can actually watch Westworld now, entirely for free, as long as you’re willing to sit through some ads — and it means Warner Bros. Discovery starts making some money on Westworld again.

What you can’t necessarily do is watch it at literally any time you want to. These free channels, called FAST (for Free, Ad-Supported Television), operate on a linear model, which is basically the same way cable TV works. You flip through channels and watch whatever is “on TV” right now. What makes FAST different from traditional cable or network TV is that it’s distributed over the internet, so you can watch on your laptop or device or smart TV, instead of over cables or airwaves.

But wait, you might ask: Doesn’t Warner Bros. Discovery now have to pay residuals to everyone involved with Westworld? Yes, it does — but the residual rates for FAST are currently lower than the SVOD rates on streaming platforms, which in turn are far lower than on broadcast television like network or cable. Additionally, Warner Bros. Discovery is getting payment from Roku and Tubi — that’s what it means to “license” your show. So there’s income and less outflow, and that’s a net positive on the balance sheet.

Speaking of balance sheets, there’s one more reason this might happen. For companies like Disney, Paramount, and Warner Bros. Discovery, every show on their platform is an asset. If an asset’s value declines more rapidly than anticipated, you can “write down” its value, meaning it’s now worth less; that ultimately creates a loss on your balance sheet, which translates to a tax deduction. If you remove a show from your platform, it’s now “impaired” in terms of earning power, and thus literally worth less. It’s all pretty complicated, but companies seem very eager to incur write-downs, perhaps in part to show their shareholders that they are serious about getting their financial houses in order. (That’s key for companies like these, which are feeling a squeeze after years of relentless, profligate spending on content to populate their platforms — especially during the pandemic.) Disney, for instance, announced that it will incur a whopping $1.5-$1.8 billion impairment charge from removing content from its platforms, which translates into a very sizable write-down and a lower tax burden.”