Streaming providers are eradicating motion pictures and collection: Here is why

The Disney+ logo is displayed on a television screen in Paris on December 26, 2019.

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Streaming should be forever.

That was the promise of a digital library of movies and TV shows.

Consumers have gotten used to it Netflix Flicking through titles, aware that proprietary content would migrate to a new platform as Hollywood studios launched their own streaming services.

Even if Warner Bros. Discovery When the company withdrew content as part of planned merger-related tax write-offs, consumers seemed to accept the move as a cost of doing business.

However there Disney Pulling dozens of shows and movies from Disney+ and Hulu, including Willow, The Mighty Ducks: Game Changers, and The Mysterious Benedict Society, subscribers are suddenly confronted with a new reality.

“At first I expected that any show that was on a streaming platform would stay on that platform,” said Conrad Burton, 35, an account manager at a transportation company in Raleigh, North Carolina. “But then I noticed things were happening.”

What is the problem?

After an initial surge in new platforms and subscriber growth, aided by pandemic lockdowns and a flood of new content, the digital streaming industry has cooled. And Wall Street has upped the pressure on media companies to focus on whether and when streaming will be profitable, rather than whether those outlets will achieve massive subscriber bases. The change came last year after Netflix reported its first subscriber loss in a decade.

“What’s affecting their income statement is the depreciation of content that has already been created and published,” said Michael Nathanson, analyst at SVB MoffettNathanson. “Warner Bros. Discovery was the first to figure this out, so we have to give him credit. They said they needed to increase their revenue, so they started removing shows from the app. Disney is doing it now and we should expect Paramount to follow suit. And one day Netflix might even do the same.”

It has been difficult for consumers to understand why content created specifically for streaming platforms has been removed, especially when the Netflix Originals remain untouched in the library.

“From a consumer perspective, they always want access to their content,” said Dan Rayburn, a media and streaming analyst.

“The part that really confuses consumers is that they don’t understand how content is licensed.”,” he said. “They get confused when one day content is available on a service and then it disappears, or when the content is still available on the service but there are only X seasons.”

Removing content from platforms is a way for streamers to avoid residual payments and royalties.

“Similar to syndication in Hollywood of yesteryear, streaming services have to pay for the right to host a title,” said Brandon Katz, industry strategist at Parrot Analytics.

He pointed out that if a track doesn’t belong to the streamer, a license fee has to be paid to the studio that owns that content. For example, Hulu licenses “The Handmaid’s Tale” from MGM Television.

Titles that you own must also be licensed. For this reason NBC Universal had to pay $500 million to stream Universal TV’s “The Office” on Peacock and Warner Bros. Discovery paid $425 million for the streaming rights to WBTV-produced “Friends.”

“The balance sheet has to reflect that,” Katz said.

In this photo illustration, the Max logo can be seen on a smartphone with the HBO Max and Discovery+ logos in the background.

Rafael Henrique | flare | Getty Images

By removing content created specifically for streaming rather than licensed shows and films, Warner Bros. Discovery and Disney can immediately reduce their costs. Warner Bros. Discovery has saved “tens of millions of dollars” by removing content, CNBC previously reported.

The studio’s removal of films and TV shows began last summer, initially with titles like Sesame Street spinoff The Not-Too-Late Show with Elmo and teen drama Generation.

But in the months that followed, more and more original content was removed from HBO and Max. Above all, the sci-fi dramas Westworld and Raised By Wolves disappeared.

“I think it puts subscribers off watching future original content,” said Matt Cartelli, 33, of Hudson Valley, New York. “Streaming used to be seen as a safe haven for consumers who were tired of watching shows being canceled on traditional TV. Now streamers are following suit by canceling their own underperforming shows.”

Cartelli was particularly disappointed to learn that Disney+ originally planned to remove “Howard,” about a songwriter whose work has been featured in Disney films like the animated film The Little Mermaid. Disney reversed its decision on the title after facing backlash on social media.

And streamers have to walk a fine line.

“The risk is the writers’ strike,” Nathanson said. “If it goes on like this for a while, they will be dependent on library content. If there is nothing there, churn will only get worse.”

Should it stay or should it go?

Streaming services are strategic about what stays and what leaves their platforms. Big hits like Max’s ‘Peacemaker’ or Disney’s ‘The Mandalorian’ are unlikely to be carried over from their respective apps.

In the meantime, underperforming series and films could be on the brink.

In the first quarter of the year, demand for dozens of series and movies dropped from Disney+ accounted for just 1.9% of the entire Disney+ catalog, according to data from Parrot Analytics. For comparison, The Mandalorian accounted for 1.3% of total demand over the same period.

Likewise, removed titles for Hulu accounted for just 0.4% of the streaming service’s demand.

And those titles are not lost forever.

Shortly after Warner Bros. Discovery cut programming from Max, he began licensing the content Fox Corp.s Tubi and Roku, free, ad-supported streaming TV platforms — also known as FAST — that allow the company to create a new revenue stream for its content.

As media companies desperate to make streaming profitable, companies are increasingly turning to new advertising strategies, from cheaper, ad-supported offerings to delivering content on FAST channels.

“My main takeaway is that nothing is guaranteed to stay with streaming forever. You’re paying for a convenient way to watch content, but it’s not a substitute for buying a movie or TV show on home video,” Cartelli said.

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