\n\n“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\u2019ll have access to our huge library of \u201ccontent\u201d forever, on demand, whenever you want it. You want more? Look, it\u2019s right there in the plus sign at the end of the platform\u2019s name. (Why did everyone do that?)<\/p>\n\n\n\n
This utopian fantasy was in serious contrast to the old way of watching TV, where you\u2019d sit yourself down to watch your show at the time it aired or you wouldn\u2019t see it at all unless you were lucky enough to catch it in reruns. Once your show was canceled, you couldn\u2019t 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.<\/p>\n\n\n\n
Turns out the utopian fantasy was a fantasy”<\/p>\n\n\n\n
…<\/p>\n\n\n\n
“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<\/a> and SAG-AFTRA is considering it<\/a>: 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\u2019s a cost that the company incurs, and if they remove the show entirely, the cost is eliminated.<\/p>\n\n\n\n Often, however, shows removed from a platform don\u2019t go away entirely. In the case of Westworld<\/em>, 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 <\/em>now, entirely for free, as long as you\u2019re willing to sit through some ads \u2014 and it means Warner Bros. Discovery starts making some money on Westworld<\/em> again.<\/p>\n\n\n\n What you can\u2019t necessarily do is watch it at literally any time you want to. These free channels, called FAST (for Free, Ad-Supported Television)<\/a>, operate on a linear model, which is basically the same way cable TV works. You flip through channels and watch whatever is \u201con TV\u201d right now. What makes FAST different from traditional cable or network TV is that it\u2019s distributed over the internet, so you can watch on your laptop or device or smart TV, instead of over cables or airwaves.<\/p>\n\n\n\n But wait, you might ask: Doesn\u2019t Warner Bros. Discovery now have to pay residuals to everyone involved with Westworld<\/em>? Yes, it does \u2014 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<\/a> like network or cable. Additionally, Warner Bros. Discovery is getting payment from Roku and Tubi \u2014 that\u2019s what it means to \u201clicense\u201d your show. So there\u2019s income and less outflow, and that\u2019s a net positive on the balance sheet.<\/p>\n\n\n\n Speaking of balance sheets, there\u2019s 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\u2019s value declines more rapidly than anticipated, you can \u201cwrite down\u201d its value, meaning it\u2019s 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\u2019s now \u201cimpaired\u201d in terms of earning power, and thus literally worth less. It\u2019s 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\u2019s key for companies like these, which are feeling a squeeze after years of relentless, profligate spending on content to populate their platforms \u2014 especially during the pandemic.) Disney<\/a>, 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.”
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