Wait, why didn't we get an article on just that?

it's funny, a couple years before the show was finished (during the first time when they stalled out for a year) my sister gave me a box set of the blu-rays, at first I was a little bummed because I'd inevitably end up with a couple mismatched DVDs/not in the box set, but it turns out that stallout was also the point where the show started imploding.

I like to joke that after she gave me the set they never finished the show, haha what are the odds!? /s

As prices and interest rates go up, people will become more concerned about getting value for their money. Having 5 different streaming services will be an increasingly difficult sell.

> "viewership is a lot lower than people think and much less correlated with show quality"

That doesn't surprise me. Many are probably just turning on the TV due old habits, and keep it on in the background while staring at their phones.

> it was axed as a cost-cutting exercise.

>In May, Disney+ announced a content removal plan designed to cut US$1.5bn worth of content, meaning it substantially reduces the company’s value, giving it a lot less tax to pay.

Cost-cutting doesn't make sense if it also cuts your revenue to the same degree. I also don't know of any tax that is based purely on the value of the company. Income tax is based on income -- if you make a profit and pay tax, you are still ahead compared to not doing so.

More importantly, why do the shareholders tolerate this? Why would they want to "substantially reduce the company's value"?

The reason it makes sense for the studios to remove these shows for the minimal benefit represented by a lowered tax burden is that the shows generate shockingly little viewership let alone revenue. The mechanism for the relationship between those things is pretty fuzzy in a subscription-based world in the first place, Did a single viewer signup for Netflix or decide not to cancel their subscription because of The Irishman, for example? That movie cost Netflix something upwards of $160 million. It made $8 million in its theatrical release. Is there any world where the remaining cost was made up for by new or retained streaming customers? I highly doubt it.

This is why the whole streaming industry is moving to ad-supported and low cost reality content. And why the services are fighting the WGA demands to release streaming viewership numbers as part of paying writers residuals. It’s not the cost of the residuals. It’s the numbers. If streaming viewership numbers were public Netflix stock would go to 0 the next day.

I think the streaming accounting isn’t as directly attributable so it probably means that costs are allocated over long periods because the single show is a very small percentage of the overall library.

So you spend $5B on shows and lump them into your library and some are watched and some aren’t, but they all pay out sort of the same. So you amortize that $5B equally over the whole schedule.

By removing shows you think won’t get you viewers you amortize the whole cost immediately.

But in the olden days revenue was more clearly attributed. So if you payed $5B for 100 shows each and the costs were equal (not really but let’s say) then each show has $50M in costs. You can run them all and when you don’t sell ads then you know they suck and can close those ones down. There’s no risk to run and see because you have revenue for each show.

And with old cable, shows paid out based on plays. So you could just not play those old shows.

But with streaming, just to have them available for streaming, even if no one views them, they make revenue for tax purposes.

In movies, the attribution was ticket sales, later home video rentals and sales. TV was attributed with Nielsen numbers and ad spend. Streaming doesn't work this way: they don't sell ads[0], and they don't charge per view, they just charge a flat fee. How that flat fee gets remunerated to the producers of the shows and movies on their platform is a complicated mess. Attribution could be done with view counts, except streaming services have been very notoriously cagey with those numbers.

In fact, part of the reason why SAG-AFTRA is getting stonewalled on streaming is that nobody in the industry wants those numbers to be public.

What happens if you don't get attribution is that the actual creative work gets devalued. You can see this in the wording that the streaming services use: they no longer show movies or TV shows, but "content" - i.e. entertainment slurry. The value of their service is not in the creative work it can provide to you but the delivery mechanism used to get it there. It's a weird parallel to the net neutrality arguments of yesterdecade, where ISPs didn't want to be 'dumb pipes', but instead actively managing the traffic of their users. And to be clear, streaming services do a lot of active management.

I suspect that if SAG-AFTRA wins, a lot of really embarrassing reports will come out suggesting that all these streaming exclusive shows were actually pulling in terrible numbers and that streaming is not nearly as much of a growth market as people thought.

[0] Well, up until recently, anyway.

For awhile, every time I opened Netflix it was promoting a new series with a full season.

Part of the reason why I won't bother with "new" streaming services is that I don't want "yet another subscription," but the other reason is that I simply don't have time to watch all that TV.

Can someone explain how the numbers add up here?

The real scandal here is how little viewership streaming shows get and how little revenue they generate off of that viewership. Particularly for how expensive these shows are.

I wrote a couple of comments elsewhere in the thread about some specifics and consequences. But the takeaway is that the last decade+ of super expensive “prestige” shows on streaming has been a huge bubble that isn’t supported by the underlying revenue generated by the shows. In 2022 Netflix spent $16 billion on producing shows [https://variety.com/2023/digital/news/netflix-content-spendi...] to generate shockingly few viewing hours (which is why they will never agree to WGA demands to release viewership numbers in order to pay writers residuals; their stock would go to 0 if those numbers ever became public). The future of streaming is ad-supported cheaply produced reality TV, ie exactly what niche cable looked like in 2008.

Your advice would be telling Apple to ditch the $10 headphone dongle because it has a low ROI, and they should be using the factory to crank out more iphones…

Yeah, I was going off the article's statement that it was about reducing value of assets. Makes more sense if write-offs are included as well.

Well, they're not going to have any WGA shows either any time soon, and maybe the WGA will start advocating for an investor lawsuit on this basis?

I wonder what percentage of streaming hours on Netflix is toddler and preschool shows like CoComelon?

The path to profitability is reruns of Cheers, low budget quiz shows and (scripted) reality TV.

however those shows do not fix modern narrative thus can not be made.

People want to watch good scripted shows, instead of they get terrible writing, terrible acting, and over all terrible shows....

I guess it makes some sense when you scrap a project completely and take a loss in exchange for a write-off, but some of these shows have been available for years.

I am still waiting for one of the Streaming Services to Make a Good TV Shows...

Until then I have TB's of good content from the past on my Home Media Server, I have no problems re-watching...

The AI stuff is a wildcard on top of everything. The worst case scenario for the WGA and SGA is that the more successful they are with their getting their demands, the less likely there will be anything resembling North America's film/tv industry left within 5 years.

Most background actors replaced by AI generated substitutes.

Writer rooms turned into editor rooms for AI generated thoughts that simply rehash the existing 100k hours of plots already extant.

In a sense, it's the buggy whip workers striking after the Advent of cars

That's a large number but so was their revenue: $31.6B.

So, Netflix declines to release viewing numbers but you somehow know they're insufficient to their bottom line to support their spend?

But I suspect that studios play it straight with taxes as the IRS doesn’t mess around, it’s criminal investigations, officers are liable, and there’s whistleblower laws where the snitch gets 15-30% of what the IRS recoups [0].

So I bet the only way we find the true cost of these things is when they write them off and even then we know the true cost of the bundle, not each item. What they probably do is include everything legally allowed.

This is still bad for studios as getting a $210M tax (corporate tax rate is 21%) reduction from a $1B write off is still way worse than breaking even since the write off is basically a $790M loss and break even is a $0 loss.

So the studio doesn’t want to do this, it’s just less bad.

I think it’s an example of optimizing after a mistake and doing this too much is a sign of bad management.

[0] https://www.irs.gov/compliance/whistleblower-office

Less bad than what? Apologies if it was outlined in the article, I can't get it to load over my crap connection.

For example. Let’s say the movie costs $100 to make. And they value the movie at $100 based on future sales. And they have $1000 in profit from other stuff they do.

So the cost of$100 and value of $100 offset each other so they pay taxes on the full $1000. Tax rate is 21% so they pay $210 and keep $790.

But if they write off the value to zero that means they have a $100 loss. So you subtract that from the $1000 of profits and pay taxes on $900. Thats $189 in taxes. You subtract that from $1000 and keep $811.

So if they don’t write it off in scenario1 they keep $790, but if they write it off they keep 811.

They still spent $100 and made nothing so that’s bad. But they are able to keep an extra $21 so really only lose $79.

Losing $79 is less bad than losing $100.

I think some of it is plain old opportunity cost and "vaulting". Streaming a classic on your own streaming network doesn't generate money like selling DVDs/Blu-Rays or another streaming network paying you to license it.

I think a lot of it is probably residuals owed to writers and actors and other staff. Many of the shows being vaulted right now are the sorts of "steady trickle" viewership shows with presumably expensive residuals owed to current creative talent: enough people are watching that the companies see the residuals they are paying on it, but not enough people that they like how much they are paying for it.

Maybe some of that is also how much of the vaulted shows are tied to writers and actors actively striking. It seems a bit unlikely of a coincidence in timing how many of these shows disappearing are happening at various stages in the strike. I would hope the National Labor Relations Board is paying close enough attention and taking notes to try to find out just how much is "coincidence" and how much is retaliatory income cuts.

I'm sure the studios still be considered the copyright owners, but I don't think there's any ethical reason why they could possibly sue you for releasing something thst they cannot ever release themselves for tax purposes. They binned their shows, so why should the law protect their copyright?

My uneducated guess is that there is no specific law that requires you to mothball a show that's been counted as a loss, but the streaming services do this anyway as a show of good faith. i.e. if the IRS were to audit you, you'd be able to show "see, it really was a loss, we made zero dollars off it!"

Morally, your argument sounds correct. Removing shows that have already been made because the owners didn't get enough profit breaks the copyright bargain. Congress should consider penalizing the deliberate destruction of American culture in this way. I doubt a judge would unilaterally decide to impose a "writ of outlawry[1] for copyright", though.

[0] Translator's note: "write-off" means deduction

[1] A 'writ of outlawry' is an old legal instrument that allowed courts to withdraw the protection of the law to criminals it could not bring to justice. Murdering them would be legally equivalent to killing a wild (non-endangered) animal. As you might imagine from a legal concept that is effectively The Purge IRL, it is not used anymore.

Damn, you had me excited for a second.

So there’s no chance I can get one of these from a small claims or administrative law judge? Like maybe even just a little one?

How do these writs interact with other wildlife laws in California? Do I have to check if the individual is a native Californian (thus considered native wildlife) or will the judge do that for me? Does that mean I can capture them in a safari if I build the double layered fence enclosures and get them certified for exotic animals?

Native species laws would not interact with writs of outlawry. Capturing outlaws and putting them in a safari would be construed as aiding and abetting, which might get you thrown in jail or outlawed yourself.

I suspect if you tried to convince an English court to actually apply a writ of outlawry to someone, they'd write a scathing and condemning response to your request to have someone Purge'd by the small claims court. If you're absolutely itching to see what happens when someone tries to invoke an ancient and unrecognized function of the legal system, then perhaps you might want to watch this video, in which a lawyer reads and explains a legal filing in Iowa that petitions for trial by combat: https://www.youtube.com/watch?v=LMT9pyilkwA

Just because they value it at $0 doesn’t mean it has no potential future value. It just means when they claim they value they won’t have any costs to deduct. So future profit margins are higher.

Which I’m pretty sure they are following since they are required to follow these and are audited and checked up on by the SEC and others.

But yeah, everyone is doing as funny accounting as possible. That’s why we have laws and rules to specify what’s allowed. And it would be truly insane to talk about this on investor calls and whatnot if it was illegal.

This is very important for tax purposes as if they ever sell it then they will pay taxes on the full amount sold. If they had a value on books then they would pay the difference of the sales price vs the value on books.

It's very difficult to understand how anyone thought this was a reasonable thing to make.

I’d have said ´ book´ instead, but IP and the associated business idea seems to be the new normal for culture. I find it a bit sad.

https://en.wikipedia.org/wiki/Philanthropy

I was complaining that in public discourse, anything not monetizable is disregarded, despite it making up (IMHO) the bulk of human activities and creation.

Superman and Batman have been around for almost 80+ years. Pokémon is approaching 30 years.

Hollywood movies made in the 1920s were remade in the 1930s which were remade in the 1940s which were remade in the 1950s and so on.

People have also been writing articles that mention this “new” normal for decades. But when does it stop being “new” lol?

How were those new-ish Game of Thrones and Lord of the Rings shows marketed? (I didn’t watch them.)

[0] As far as I'm aware, nobody has actually tried selling fractionalized derivatives of copyright, patent, or trademark interest on an open market. The closest you can do is buy shares of a media conglomerate. I assume it would at least be legally possible if you could get the SEC to sign off on it and write up a contractual structure for how the fractional owners of the work would agree on licensing it out.

What’s different now?

How is this better than simply working on a cash basis, letting companies take the loss in year 1 when they build X, and then, for tax purposes, carry forward those net losses against the future revenues? Sure seems much simpler.

Not that I'm representative, but there was only one in there that I watch: Severance.

Even if nobody is going to watch it, if you already paid for the production and it’s ready, why not put it online?

And others might not have had much audience, but once they're available and streaming, how much overhead is there to just leave them there?

maybe not one considered legal.

* or possibly a profit, but no one will ever know.

You can either write it off and pay no taxes on those profits ($200M saved), or not ($200M squandered) (I'm assuming 20% tax rate just to make math easier.)

Also, many executives have compensation packages tied to financial metrics and they've been known to game those metrics for personal gain.