<story><title>Netflix&apos;s New Chapter</title><url>https://stratechery.com/2023/netflixs-new-chapter/</url></story><parent_chain><item><author>darth_avocado</author><text>&amp;gt; It’s Disney’s content&lt;p&gt;That is partly the problem. You spend hundreds of millions to make blockbuster movies and then release it on Disney+ in a few months for free (or sometimes directly). That costs money. Add to that over reliance on only Disney content creates two problems:&lt;p&gt;1. You can’t have enough new content every month, subscribers therefore don’t keep the subscription year round.&lt;p&gt;2. You have to pay money to create content. Vs the ability to buy content for cheap or add it for a few months.&lt;p&gt;On top of that, Disney overseas also includes live sports in their packages which can get expensive.</text></item><item><author>zamadatix</author><text>What I don&amp;#x27;t understand is how e.g. Disney+ is losing so much money. It&amp;#x27;s Disney&amp;#x27;s content, has an enormous userbase, and somehow is bleeding billions?</text></item><item><author>no_wizard</author><text>I&amp;#x27;m gonna attempt to break this down:&lt;p&gt;- Netflix has 5-6 Billion USD free cash flow, and because they got what debt they do have under favorable terms, they are positioned to retain most of that free cash flow&lt;p&gt;- Disney, Comcast (Peacock), CBS&amp;#x2F;Viacom and other media corporations are saddled with debt, and are all losing money on their own independent streaming businesses. Likely untenable in their shareholder model&lt;p&gt;- Therefore, Netflix needs to do what it can to retain &amp;#x2F; attract subscribers, but essentially can wait until the other services have to give up due to cost&lt;p&gt;In a nutshell, Netflix is poised to play more long game, due to cost structures of their competitors.&lt;p&gt;so fair, sounds good, but it assumes the boards &amp;#x2F; leadership of these companies won&amp;#x27;t also play a long game, seeing some sort of profitability horizon is they cannibalize their existing businesses for sticky services (like streaming). I could see Disney doing this, to some extent, with their cable TV channels and movies. I&amp;#x27;m less bullish on Comcast&amp;#x2F;NBC, CBS&amp;#x2F;Viacom or really any other media company being able to do this, simply because they don&amp;#x27;t have the &amp;quot;staying power&amp;quot; Disney does.&lt;p&gt;This also fails to account for the strength of HBO Max (very strong sub numbers)</text></item></parent_chain><comment><author>madeofpalk</author><text>On top of the... &amp;#x27;opportunity cost&amp;#x27; of not licensing out content that otherwise would have went to Netflix, ABC, whoever.&lt;p&gt;If previously Disney made Daredevil and &amp;#x27;sold&amp;#x27; it to Netflix for $1m (hypothetically), but now you&amp;#x27;re holding that back to stream yourself, you&amp;#x27;ve got to account for that missing $1m somehow.</text></comment>
<story><title>Netflix&apos;s New Chapter</title><url>https://stratechery.com/2023/netflixs-new-chapter/</url></story><parent_chain><item><author>darth_avocado</author><text>&amp;gt; It’s Disney’s content&lt;p&gt;That is partly the problem. You spend hundreds of millions to make blockbuster movies and then release it on Disney+ in a few months for free (or sometimes directly). That costs money. Add to that over reliance on only Disney content creates two problems:&lt;p&gt;1. You can’t have enough new content every month, subscribers therefore don’t keep the subscription year round.&lt;p&gt;2. You have to pay money to create content. Vs the ability to buy content for cheap or add it for a few months.&lt;p&gt;On top of that, Disney overseas also includes live sports in their packages which can get expensive.</text></item><item><author>zamadatix</author><text>What I don&amp;#x27;t understand is how e.g. Disney+ is losing so much money. It&amp;#x27;s Disney&amp;#x27;s content, has an enormous userbase, and somehow is bleeding billions?</text></item><item><author>no_wizard</author><text>I&amp;#x27;m gonna attempt to break this down:&lt;p&gt;- Netflix has 5-6 Billion USD free cash flow, and because they got what debt they do have under favorable terms, they are positioned to retain most of that free cash flow&lt;p&gt;- Disney, Comcast (Peacock), CBS&amp;#x2F;Viacom and other media corporations are saddled with debt, and are all losing money on their own independent streaming businesses. Likely untenable in their shareholder model&lt;p&gt;- Therefore, Netflix needs to do what it can to retain &amp;#x2F; attract subscribers, but essentially can wait until the other services have to give up due to cost&lt;p&gt;In a nutshell, Netflix is poised to play more long game, due to cost structures of their competitors.&lt;p&gt;so fair, sounds good, but it assumes the boards &amp;#x2F; leadership of these companies won&amp;#x27;t also play a long game, seeing some sort of profitability horizon is they cannibalize their existing businesses for sticky services (like streaming). I could see Disney doing this, to some extent, with their cable TV channels and movies. I&amp;#x27;m less bullish on Comcast&amp;#x2F;NBC, CBS&amp;#x2F;Viacom or really any other media company being able to do this, simply because they don&amp;#x27;t have the &amp;quot;staying power&amp;quot; Disney does.&lt;p&gt;This also fails to account for the strength of HBO Max (very strong sub numbers)</text></item></parent_chain><comment><author>scarface74</author><text>That’s not entirely true.  Disney+ is partially losing money because of “transfer payments”.  Disney+ has to “pay” Disney studios the market rate for the right to stream a movie.  Of course the money mostly flows up to Disney. But from an accounting standpoint, Disney+ can’t say it’s profitable by getting movies for free from Disney studios and cause Disney studios to lose potential profits they could have made elsewhere.&lt;p&gt;There are also revenue share agreements that are involved with actors.  That are still taken into accounts&lt;p&gt;&amp;gt; You can’t have enough new content every month, subscribers therefore don’t keep the subscription year round&lt;p&gt;That’s not strictly true either for kids content.  You can keep recycling content to kids for years and kids will rewatch the same thing.&lt;p&gt;Disney has been making money off the same animated content for over half a century.  To a first approximation, no one cares about Netflix’s back catalog.</text></comment>