How does a company as big as Disney lose money on Streaming?

[JoeSchmuckatelli]

Disney Ekes Out Slim Profit as Streaming Losses Grow - Variety

I mean, they own the IP.  Is transmission really that expensive?

[Kerbart]

38 minutes ago, JoeSchmuckatelli said:

Disney Ekes Out Slim Profit as Streaming Losses Grow - Variety

I mean, they own the IP.  Is transmission really that expensive?

It's not free but you also need servers for all that content. And once you have enough servers you constantly need to replace hard disks, boards. And don't forget electricity, not just for powering those servers but also for cooling them. And you need a building to put them in. All of that costs money.

[JoeSchmuckatelli]

13 minutes ago, Kerbart said:

It's not free but you also need servers for all that content. And once you have enough servers you constantly need to replace hard disks, boards. And don't forget electricity, not just for powering those servers but also for cooling them. And you need a building to put them in. All of that costs money.

So - isn't that something that once the basic infrastructure is established just becomes a maintenance item?  Someone is getting paid; it can't just be server manufacturers and AC installers.

Just pondering whether Disney might just start buying time on SX to deploy their own sats.

[Nuke]

bad shows. seems they are using the shotgun approach to their star wars content. do lots of things and see what sticks. you end up with a couple good shows and several failure shows. ultimately i think for a show to be good it just involves hiring showrunners who both know what they are doing and care about the franchise. rather than hire these inexperienced kids out of college who have never done a thing of note and have an agenda other than making good shows. 

4 hours ago, Kerbart said:

It's not free but you also need servers for all that content. And once you have enough servers you constantly need to replace hard disks, boards. And don't forget electricity, not just for powering those servers but also for cooling them. And you need a building to put them in. All of that costs money.

cant imagine its any worse than manufacturing and shipping dvds. 

Edited November 22, 2022 by Nuke

[DDE]

5 hours ago, Nuke said:

bad shows. seems they are using the shotgun approach to their star wars content. do lots of things and see what sticks. you end up with a couple good shows and several failure shows.

TBH it feels that the shows are only bad compared to the vast budgets, and those budgets don't match the production quality or the viewership. They're not that bad compared to 2000s TV, but they're not good enough to make money. Something is really sucking up the Mouse's money, and they don't seem to find a way to trim the fat off the Hutt.

A caveat is that all of this is second-hand. Don't really need even more drama at this point...

[tater]

10 hours ago, DDE said:

TBH it feels that the shows are only bad compared to the vast budgets, and those budgets don't match the production quality or the viewership. They're not that bad compared to 2000s TV, but they're not good enough to make money. Something is really sucking up the Mouse's money, and they don't seem to find a way to trim the fat off the Hutt.

It's not the production values, it's the writing.

[Scarecrow71]

For myself, I originally ended up with Disney+ a few years ago when I upgraded to my now-current phone.  Verizon, so I was only paying $6.99 a month.  Now spread that out across a few hundred thousand subscribers.

This year, my wife upgraded to an iPhone 14.  Verizon, so we ended up getting Disney+/Hulu/ESPN for like $12.99 a month.  Now spread that out across a few hundred thousand subscribers.

Disney is losing money on streaming because people are taking advantage of ridiculous deals to get the streaming services through their (Disney's) partnership with Verizon.  And that deal NEVER ENDS.  Now tack onto that how people share accounts and passwords, and you've got potentially millions of people watching Disney+ who aren't paying for it.  And remember that the cost to make some of these shows that have high CGI requirements is ridiculous.  So I'm not surprised that Disney is losing money here.

[SunlitZelkova]

51 minutes ago, Scarecrow71 said:

Disney is losing money on streaming because people are taking advantage of ridiculous deals to get the streaming services through their (Disney's) partnership with Verizon.  And that deal NEVER ENDS.  Now tack onto that how people share accounts and passwords, and you've got potentially millions of people watching Disney+ who aren't paying for it.  And remember that the cost to make some of these shows that have high CGI requirements is ridiculous.  So I'm not surprised that Disney is losing money here.

If memes are to be believed piracy is a pretty severe issue too.

23 hours ago, JoeSchmuckatelli said:

Disney Ekes Out Slim Profit as Streaming Losses Grow - Variety

I mean, they own the IP.  Is transmission really that expensive?

17 hours ago, Nuke said:

bad shows. seems they are using the shotgun approach to their star wars content. do lots of things and see what sticks. you end up with a couple good shows and several failure shows. ultimately i think for a show to be good it just involves hiring showrunners who both know what they are doing and care about the franchise. rather than hire these inexperienced kids out of college who have never done a thing of note and have an agenda other than making good shows. 

cant imagine its any worse than manufacturing and shipping dvds. 

I don’t think transmission costs have to do with it, nor content quality. While a show on TV can get revenue from advertising, a streaming show has the subscriber fees and that’s it. But it’s one fee for hundreds of shows, so they don’t make as much money as if they were on television networks.

I could have hundreds of the best TV shows and movies in the world, but if I charge 7.99 a month vs. thousands of dollars for the ads in between and hundreds for network subscription, I’m going to lose money.

A similar dynamic can be found in releasing movies for a streaming service vs. in a theater. I imagine this is also why Netflix has had revenue issues, not password sharing, and why they did better when they simply had movies other people made beforehand instead of trying to finance dozens of original productions around the world.

[HebaruSan]

Do streaming services not have ads?

[AlamoVampire]

14 minutes ago, HebaruSan said:

Do streaming services not have ads?

Typically no. But rumor has it netflix or disney+ (forget which, been a while since i heard it) may introduce a tier at low cost with ads. The reason i use netflix or disney+ or paramount+ is the lack of ads. Id guess a lot of ppl are the same. Id imagine a lot of blowback will happen if ads get introduced. Ppl hate ads, its why ad blockers exist.
 

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Edited November 22, 2022 by AlamoVampire

[JoeSchmuckatelli]

Ad revenue would not explain the losses.  Given that most of their IP is already produced and the profits received... to be a loss there has to be some kind of new cost associated with having a streaming service.  Otherwise calling a loss 'well, we could have made $X from airing on ABC via ad revenue, but on D+ there's no ads"... that's not actually a loss.

There has to be something that costs Disney money that they're not reaping via subs.  And I find it really difficult to believe that getting (Let's call it 1$ per month average between paying and 'deal' subscribers, if @Scarecrow71 is correct) $164million/month isn't profitable.  (We can presume the actual number is higher).  

Global number of Disney+ subscribers 2022 | Statista

So something must be going on that is REALLY, REALLY expensive.

[HebaruSan]

1 hour ago, JoeSchmuckatelli said:

most of their IP is already produced

But they are still producing new series, right? How many, and with what kind of budget? Yes they own Star Wars (1977), but they might not be confident that there are enough people left who haven't seen it to drive subscriptions.

[JoeSchmuckatelli]

6 minutes ago, HebaruSan said:

still producing new series, right? How many, and with what kind of budget?

That's the slice I just don't know.  Maybe it's all 'new series' production costs that aren't being reaped through traditional Theater Release and TV ads.  

The thing is... what will the market look like moving forward.  I suspect that is something unknown.

Box Office Drought Prompts Media Execs And Wall Streeters To Take Stock Of Post-Pandemic Movie Business – Deadline

People are returning for things like Top Gun and Rise of Gru - so there's still demand for the big screen experience.  But there's also lots of talk about how profitable some of the streaming services are (along with news that Disney and Netflix are struggling).

[HebaruSan]

13 minutes ago, JoeSchmuckatelli said:

That's the slice I just don't know.

While I don't have enough interest to do so, it's probably possible to at least estimate it. They have a list of all their series:

https://disneyplusoriginals.disney.com/all-disney-plus-original-series

And a web search for "andor budget" suggests that series costs $15–25 million per episode. In principle one could seek out such figures for each show and add them up. I can easily imagine that number exceeding the previous income estimate of $164 million/month, if just one show is already 12% of the total.

EDIT: Just realized I assumed Andor releases one episode per month. Presumably it's more than that? 4, perhaps? In which case you're talking about 50% of the income estimate. For one show.

EDIT II: Yeah, looks like they're roughly weekly.

Edited November 23, 2022 by HebaruSan

[SunlitZelkova]

3 hours ago, JoeSchmuckatelli said:

Ad revenue would not explain the losses.  Given that most of their IP is already produced and the profits received... to be a loss there has to be some kind of new cost associated with having a streaming service.  Otherwise calling a loss 'well, we could have made $X from airing on ABC via ad revenue, but on D+ there's no ads"... that's not actually a loss.

There has to be something that costs Disney money that they're not reaping via subs.  And I find it really difficult to believe that getting (Let's call it 1$ per month average between paying and 'deal' subscribers, if @Scarecrow71 is correct) $164million/month isn't profitable.  (We can presume the actual number is higher).  

Global number of Disney+ subscribers 2022 | Statista

So something must be going on that is REALLY, REALLY expensive.

I think you are underestimating how much it costs to make a TV show/movie and how many there are. Especially considering everything is so CGI heavy nowadays.

Quote

Back in 2020 Disney shared that across all of its direct-to-consumer services, it expected to spend between $14-$16 billion on content through fiscal year 2024. About $8-$9 BILLION of that was meant to be set aside for Disney+ specifically. [Emphasis modified]

https://www.disneyfoodblog.com/2022/09/22/how-much-money-is-disney-actually-losing-on-disney-and-does-it-matter/

At the same time, it doesn't appear to be that alone based on this (actually very informative) article. The Disney+-Hulu-ESPN bundle, with its reduced costs for all three, is apparently part of the issue.

Quote

Disney went on to note that the “increase in programming and production costs was primarily due to more content provided on the service.”

It also seems like Disney might be spending even more money to promote its direct-to-consumer platforms than it expected to. This has to do with the technology and marketing losses Disney noted due to growth in existing markets and new markets.

But some of the losses at Disney+ may also have to do with a penalty Disney had to pay to end a customer license agreement early in order to get some content on Disney+. According to SFGATE, some speculated that this had to do with Marvel shows like Daredevil and Jessica Jones that suddenly moved from Netflix to Disney+.

In Q2 of fiscal year 2022, the average monthly revenue increased. But in Q3 of fiscal year 2022, things went down. Disney shared that the “average monthly revenue per paid subscriber for domestic Disney+ decreased from $6.62 to $6.27 due to a higher mix of subscribers to multi-product offerings.” In these “multi-product offerings” — like bundles with Hulu — Disney+ might be included at a cheaper price, thereby reducing how much money Disney is getting from each person.

The other concern some have is that a decent portion of Disney+ subscribers come from places where Disney+ is included at a very low cost. This was actually something CNBC asked Chapek about in 2022. The interviewer questioned whether Chapek was concerned that the growth in subscriptions would come from those that aren’t as “valuable” from a revenue perspective.

And considering that the majority of Disney+ revenue comes from subscription fees (at the moment), that focus on subscriber growth makes sense — it links future profitability to subscriber growth in a way that is easy to measure right now.

They actually expected these losses though. I didn't click on the headlines of the usual suspects (CNN, NBC, CBS, etc.) but if there was any panic on their part over the CEO change, there shouldn't have been, although investors are purportedly irritated despite foreknowledge.

Quote

Thus far, Disney has projected that Disney+ will be profitable by 2024. It made that statement back in 2020, and Disney reaffirmed that guidance in 2022.

As CNBC points out, investors used to not really care if a company was losing money with streaming or spending a lot on new content because the companies were in “land grab” mode — just getting all of those new subscribers. But one portfolio manager warns that the “land grab” phase has ended and now it’s about “consolidation and rationalization.”

They're planning to introduce ads btw. The ad plan costs the same as the existing one, and the ad-less one will cost more.

[DDE]

9 hours ago, tater said:

It's not the production values, it's the writing.

I wanted to try to dodge this Mumakil in the room. Unfortunately, the writing in a lot of them could be improved with very little added cost, yes. It definitely doesn't drive the costs.

But at this point, I'm having serious questions as to what they're burning money on. And the ouster of the cost-cutter Chapek in favor of bringing back Iger is very, very alarming (for them).

And I think it's a reasonable inference that they had to pay Chapek boatloads of money for his dismissal. From the outside, it looked like the middle management, whom he was going to put on a tight financial leash, retaliated with a political assassination.

2 hours ago, SunlitZelkova said:

They're planning to introduce ads btw. The ad plan costs the same as the existing one, and the ad-less one will cost more.

Oh, brilliant. This is certainly not going to infuriate the already rather irate viewers.

It's not like their exclusive content is so damn precious that people aren't going to unsubscribe.

Edited November 23, 2022 by DDE

[Pthigrivi]

On 11/22/2022 at 10:25 PM, SunlitZelkova said:

They actually expected these losses though. 

This is the closest. With cable in its twilight theres a bit of a feeding frenzy between the big streaming content providers and its worth operating at a loss if you think you can overwhelm and consolidate the largest userbase. Netflix, Amazon, Disney, and the rest are all trying to choke out the competition. There’s a lot of speculative spending on new series but I suspect the largest cash hog has been buying up IP like Marvel and Star Wars in the hopes they can milk existing fanbases long enough to buy out competitors with shallower pockets. 

Edited December 14, 2022 by Pthigrivi

[kerbiloid]

How does a casino lose money on free alcohol?

How does a drag dealer lose money on first dose?

Edited December 14, 2022 by kerbiloid

[magnemoe]

On 11/23/2022 at 12:33 AM, JoeSchmuckatelli said:

Ad revenue would not explain the losses.  Given that most of their IP is already produced and the profits received... to be a loss there has to be some kind of new cost associated with having a streaming service.  Otherwise calling a loss 'well, we could have made $X from airing on ABC via ad revenue, but on D+ there's no ads"... that's not actually a loss.

There has to be something that costs Disney money that they're not reaping via subs.  And I find it really difficult to believe that getting (Let's call it 1$ per month average between paying and 'deal' subscribers, if @Scarecrow71 is correct) $164million/month isn't profitable.  (We can presume the actual number is higher).  

Global number of Disney+ subscribers 2022 | Statista

So something must be going on that is REALLY, REALLY expensive.

Producing new primary shows are very expensive, and its this shows they spend all the money on adds to get you to subscribe. 
If the show then send out to be an fail because of bad writing you might be well into producing second season. 
On the other hand If show is good many just sub for one month to binge it.  
Yes this hits all the streaming services but Disney don't have that much new stuff. 

Second is the streaming war, its way to many steaming services and its an war over the customers, add making cheap deals to inflate the subscription numbers for investors. 
You also has the infamous Hollywood budgeting, if you are not making an profit its best to account the deficit as large as possible so parent company can write it off on the taxes.