We already know Disney is taking a hack-and-slash approach to its streaming services. In the quarterly earnings report, they pointed to a reduction in fees to be paid to content licensed on their services. Shortly after Willow, Y: The Last Man, The Mighty Ducks: Game Changers, The Hot Zone, Big Shot, Turner & Hooch, Diary of a Future President, Dollface, Little Demon, and The Mysterious Benedict Society were among those yanked off platforms.
The general reason is this. Even if they created those shows, certain contracts will be in place with talent and production houses to pay certain fees for the content to appear on the platforms. Disney has the analytics that tells them the eyeballs on this content is so low that these shows are essentially making them a loss due to those fees. The shows become worth more to Disney dead than alive. By taking writedowns, and removing the content, they can at least gain a tax advantage.
And write-down they have. Disney made an official SEC filing late Friday that it will officially take $1.5 billion in content writedowns associated with removing streaming programming from its platforms. Not only that, the filing adds that a review of remaining streaming content is continuing and Disney expects more programming to be removed.
Disney+ grew astronomically at launch but has seemed to stutter and plateau lately. Analysts are switching from concentrating on subscriber growth to underlying profit and loss, as it becomes clear that a huge back catalog alone is not enough to maintain subscriber numbers. That means it is over to new content, but if the Marvel shows and Star Wars content s pulling in the eyeballs, then those incredibly expensive shows end up right in the firing line too.
Disney wants a further $400 million in content impairment charges and has said in the filing that they “may terminate certain license agreements for the right to use content on its platforms”.
7,000 employees have already gone as a result of Disney#s general cost cutting. More are expected.