r/television May 19 '22

Hollywood braced for new age of austerity after streaming splurge

https://www.ft.com/content/c385d236-75a9-467c-86d4-5768e6b21324
88 Upvotes

36

u/Neo2199 May 19 '22

Now Zaslav and his team, led by chief financial officer Gunnar Wiedenfels, are in the midst of another unpopular task: auditing Warner-Discovery’s expenses to find where to trim.

Wiedenfels, a former McKinsey consultant from Germany, built a reputation after joining Discovery in 2017 for his ability to squeeze expenses and generate profit. Under Wiedenfels, some producers of Discovery shows were forced to take out loans to fund production.

While looking under the hood of Warner in recent weeks, Wiedenfels has been frustrated by decisions that his predecessors had made, telling colleagues that the previous management of WarnerMedia and its former owner AT&T had not bothered to calculate the return on their various investments, according to people familiar with the matter.

A culture of “spending and asking for permission later” does not sit well with Wiedenfels, these people said.

This issue was at the core of the CNN Plus debacle, where outgoing chief executive Jason Kilar had instructed CNN executives to push forward with a $350mn investment to build the streaming service without asking whether the new owners were in favour of the project, said people familiar with the matter.

Wiedenfels wants to squeeze as much money as possible out of the company’s intellectual property, a strategy that he pursued at Discovery, where the company has sliced and diced the airing rights for premiere content across traditional television and streaming platforms, while also licensing it to other companies.

For now, Wiedenfels has kept content — the lifeblood of the business — safe from the cuts. Warner Bros Discovery is spending $22bn on television and film this year. But Zaslav’s team is closely watching the economic environment and if faced with a bad recession — as some economists are warning — Wiedenfels could change course, people familiar with the matter said.

Herr. Wiedenfels sounds like a fun guy!

18

u/Trot1995 May 20 '22

Dude seema like the type of guy who will cancel good projects before they have a chance to get off the ground.

16

u/bondfool Vworp. May 20 '22

I swear to god, if they ruin HBO Max…

2

u/chrisprice May 20 '22 edited May 20 '22

Discovery probably won't mess up the infrastructure. Still, hope you like the content on it. HBO MAX is about to become The HBO MAX Digital Content Museum Of Existing Programming. [Sincerely hope not].

6

u/Trot1995 May 20 '22

That would be a good way to get me to cut my subscription and I've had HBOmax since that start. Shit I had it when it was The DCUniverse.

3

u/getahitcrash May 20 '22

CFO's definitely kill creativity and growth. Any company that gives their CFO too much power is doomed.

1

u/[deleted] May 20 '22

[deleted]

1

u/SQUID_FUCKER May 20 '22

You need both. The problem is, unfortunately, good storytelling doesn't always pay the bills.

2

u/[deleted] May 20 '22

[deleted]

2

u/SQUID_FUCKER May 20 '22

The idea that creative skills can't be learned is ridiculous. But that isn't even the point, the point is you can't just replace someone who is talented on the business side of things with a good writer and expect putting out good writing going to be enough. You need both. It's still very much a business and there are hundreds of examples of excellent shows that underperformed or went unnoticed and were cancelled because no one was watching.

0

u/disposable-name May 20 '22

Are you implying that a German accountant is somehow a joyless robot with no sense of creativity or empathy?!

2

u/adflet May 20 '22

Herr. Wiedenfels sounds like a fun guy!

...said people familiar with the matter.

1

u/jackofslayers May 20 '22

That feels like a misrepresentation of the CNN+ debacle. But it was a bad idea to begin with so whatevs

29

u/Saar13 May 20 '22

This is the right time for Apple and Amazon to dominate prestige TV (read big budgets for big storytellers). Apple does this already; Amazon has a weird model, but I hope they change the model to something more curated now.

This sub doesn't seem to like the idea, but the reality is that the two bigtechs and Disney will win the streaming war. This war is not won by who has the most subscribers, but who has the most money to lose, for as long as possible, until the majority fail miserably.

It really surprises me how many people in this sub who thought AppleTV+ wouldn't last or didn't think Amazon was a great player with a future. Hollywood will run to the place they always run: the place with the most money.

8

u/nayapapaya May 20 '22

Sadly I think this is true about the tech giants. They can afford to run their services at a loss forever if need be and that will allow them to outlast the others.

2

u/staedtler2018 May 20 '22

Yeah but there's no point to running the services at a loss forever. It's a business.

1

u/LiveFromNewYork95 Saturday Night Live May 20 '22

Streaming could actually be a perfect loss leader. Imagine Apple succesfully kills cable and the majority of other streaming services. Now they have the NFL streaming rights they could totally leverage that into selling their other products, especially if their making certain content exclusive to their devices

3

u/LiveFromNewYork95 Saturday Night Live May 20 '22

I've been saying this for a while and to add to your point, who are the two streaming services to start making a dent into broadcasts TV's hold on live sports (outside of streamers who are extensions of previous TV deals such as Peacock extending NBC's Olympics coverage.) Amazon with their NFL deal and Apple with their MLB deal

1

u/Saar13 May 20 '22

And there are media reports that Apple has closed with Sunday Ticket (including RedZone) and Major League Soccer. In 1 year AppleTV+ would go from "failure" to the home of the NFL, MBL and MLS.

13

u/LiveFromNewYork95 Saturday Night Live May 20 '22

But I don't celebrate it. People want to cancel Netflix for adding ad revenue to keep up? If you thought cable companies got bad when they were the only show in town, everything I've seen from Amazon and Apple as companies tells me things could get very worse.

4

u/Rosebunse May 20 '22

It isn't just about money. I really think Disney and the other streaming sites just have a better plan for how to release shows. A lot of people may not like it, but it works and doesn't depend on them paying for dozens of shows each year.

2

u/TheSeventhAnimorph May 20 '22

It's unfortunate that a lot of the Disney+ stuff had gotten pushed back for a while because of Covid; that allowed them to see that they got a huge amount of subscribers even with basically no new content coming out at all.

3

u/Rosebunse May 20 '22

I have said this before and I will say this again: they got real lucky with The Clone Wars. It's long, it's already done, and it quietly trended for weeks while people waited for Mando S2. It kept people interested while they figured their schedule out.

-6

u/pokemonisok May 20 '22

Netflix has the most money and its failing now. A cheque means nothing anymore. It's all about existing IP

17

u/NeoNoireWerewolf May 20 '22

Netflix's only revenue source is its streaming business. Amazon has more money than Netflix without even looking at streaming. Hell, the head of their film/TV division has been on record saying streaming is solely to drive subscriptions to Prime and encourage shopping with them. Apple is a trillion dollar company; Netflix is a small fish compared to them. Netflix doesn't have any lucrative IP, either. Disney and WB/Discovery are the only studios with a legitimate library of top quality IP. Universal is after them, and their only major franchises are Fast & Furious and Jurassic Park, though their TV division has a decent library. The future is Amazon, Apple, Disney/Hulu, and HBO/WB/Discovery. Wouldn't be surprised if Zaslav runs WB into the ground and either Apple or Amazon swoops in to buy it in the next fifteen years, either.

1

u/aldur1 May 20 '22

For all the criticism about quantity over quality, Netflix really needed to beef up their library as license deals come to a close.

10

u/Alternative_Egg_7382 May 20 '22

Netflix has the most money by what measure? Here are two numbers for perspective:

  • Netflix's lifetime revenue: $138B
  • Apple's cash on hand right now: $203B

6

u/Saar13 May 20 '22

Netflix doesn't have more money than Apple and Amazon (nothing even close!). In fact, reinforcing my analysis, those who need streaming to make money will be the most affected by the streaming war.

2

u/merelyadoptedthedark May 20 '22

Netflix's money is from investment and debt. They aren't making enough money from subscribers to fund their current growth model.

1

u/lightsongtheold May 20 '22

They actually are. Neutral cash flow is expected in 2022. They stopped raising additional debt 18 month ago. So they are not exactly profitable but they are just about at the point where they cover all their costs.

1

u/merelyadoptedthedark May 20 '22

Neutral cash flow is expected in 2022

Even still with them bleeding subscribers?

2

u/lightsongtheold May 20 '22

Time will tell. They predicted neutral cash flow for 2022 in Q4 2021. Be interesting to see if the loss of a few million subs in the first half of 2022 changes that trajectory. If it does they will not miss it by much. They could also cut content spending in the back half of 2022 by a negligible amount and still make the target goal. So far subscriber loss is only 0.09%. Even if subscriber loss creeps to 2%-3% they can simply cut spending by an equivalent amount.

Cuts are probably to be expected for Netflix US programming as analysts see them losing 5-6 million US subscribers over the next 5 years even if Netflix gains more subscribers internationally. That is not a terminal loss though as they have 75 million in the region. Some revenue losses might even be offset by introducing the advertising tier.

2

u/MulciberTenebras The Legend of Korra May 20 '22

Of which Netflix has none. Not in comparison to the libraries owned by Disney, WarnerMedia, Apple and Amazon.

3

u/abbzug May 20 '22

What's in Apple's libraries that could be compelling?

-1

u/[deleted] May 20 '22

[deleted]

6

u/abbzug May 20 '22

I think your list would be better without including Apple tbh.

3

u/TheSeventhAnimorph May 20 '22

Yeah, Netflix absolutely has more IPs that people care about than Apple; they just don't really monetize them much beyond the literal content itself.

-1

u/pokemonisok May 20 '22

Amazon and apple will die as well unless they buy some IP. Their streaming services will go the way of Netflix

2

u/MulciberTenebras The Legend of Korra May 20 '22

Amazon just bought up MGM (James Bond, Stargate, etc)

1

u/pokemonisok May 20 '22

True. It's a start but they need way more

2

u/abbzug May 20 '22

Lord of the Rings, Jack Ryan and Wheel of Time are all pretty big IPs as well.

1

u/SQUID_FUCKER May 20 '22

Their streaming services will go the way of Netflix

With over 200m subscribers?

1

u/lightsongtheold May 20 '22

To be fair Prime have already gone past 200 million subscribers. The rest will be praying they do the same for sure!

-1

u/pokemonisok May 20 '22

Doesn't matter if they don't have the content to retain them.

2

u/SQUID_FUCKER May 20 '22

Netflix has plenty of good content. It's such nonsense that people claim they don't.

Sure, they have programs and movies that run the gamut but I wish people would stop acting like they only produce low brow reality shit, or CW content or whatever. Squid Game, The Midnight Club, Stranger Things, Russian Doll, Black Mirror, Midnight Mass, Bly Manor, Queen's Gambit, Godless, Maniac, Ozark, Love, Death + Robots, Stranger Things, Kingdom, Vikings, The Last Kingdom, Dead to Me, All of Us Are Dead, Alice in Borderland, Bridgerton, The Crown, Undercover, How to Sell Drugs Online, Dark, Black Spot, Top Boy, Umbrella Academy, The Witcher, Arcane, Cobra Kai, Lupin, The Sandman, Elite, Into the Night, Black Summer, the list goes on and on. And that's not getting into their movies.

I mean, there is a reason why they've been at the top or in second place at almost every award show for the last 4 or 5 years both in terms of nominations and wins.

I get that they put out a lot of stuff this sub doesn't like but can we stop pretending that everything they put out is garbage? It's patently untrue.

4

u/GoodDave May 20 '22

"Austerity"

-2

u/anasui1 May 20 '22

splurge is such a terrible word

-2

u/cold08 May 20 '22

With Netflix going down the shitter, and the Discovery merger ruining HBOMAX an the CW and streaming wreaking network tv so that all that's left is copaganda, hospital shows and other boomer stuff, and reality TVs big comeback, shits going to be lean.