Disney to save on content costs

With big losses in online video streaming, I thought something was likely to change.

Disney reported Q1 2023 results, which included streaming (DTC) losing $1.1 billion dollars on $5.3 billion in revenue (-20 % operating marigin). In the last 12 months operating losses have been $4.6 billion and quarterly revenue grown 12 %, while costs gone up 20.7 %.

(source: Disney earnings presentation Q1 2023)

Disney is planning to lower annual content costs (possibly across both streaming and other areas) with $3 billion. Streaming content costs were $15.2 billion during the last 12 months, so it will be a reasonably large cut.

Disney’s plan is quite simple. Getter better ROI on content spend, operate more efficiently (lower marketing costs and lower total costs for people), add more subscribers and increase prices/lower churn. Problem is that some actions work against each-other. I.e. lower content investment might lead to fewer new subscribers and higher churn. I.e. it is simple but not easy.

It will be interesting to see if Paramount, NBCUniversal and HBO/Discovery try to manage down their costs and losses too, or if someone has the appetite to invest more aggressively (my bet is they try to manage down losses). And it will be quite interesting to see how if a profitable Netflix can find an advantage in this situation.

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