Would you all explain to me how removing content we expect to have access to is a “cost savings” measure?
The following is from the Willow Wikipedia page, which led me to the linked URL:
The series was removed from Disney+ on May 26, 2023, amidst a Disney+ and Hulu content removal purge as part of a broader cost cutting initiative under Disney CEO Bob Iger.
I’ve been abroad for a month and earned some time off afterwards. One of my kids reminded me that we never finished Willow, so I said “let’s do it now!” The show wasn’t perfect for many reasons, but I wanted to finish it for nostalgia’s sake and my child legit found it interesting. Lo and behold, the series isn’t on Disney+ any more!
A quick search later, I see the above referenced quote linking to the article associated with this post… which only made things worse. The Mysterious Benedict Society was something my whole family could watch and enjoy without arguments! Turner and Hooch was dorky, but something my youngest loved and it was a super safe and easy pick for us bond over.
This post isn’t about whether the shows are good. And it isn’t about how nearly every show I like ends up cancelled. The point is that I paid for access, they were then quietly removed (for various platforms), and I have zero understanding as to how this saves these companies money.
Would someone explain?
P. S. Yes, I know this is old news. However, this is just how I am. I’m not up to date with anything in the entertainment world. I intentionally wait a few seasons for things because I loath when shows are cancelled after a season. (I’m looking at you, Firefly.) I’m the same way with books, often waiting to read a trilogy after its published because I don’t like the wait in between books. (Thanks, Rothfuss).
I just don’t take cancellation wells, especially when I was on top of everything including summer podcasts and such. (Now anything with the names Abrams, Lindelof, or Cuse makes my skin crawl.)
I know. I’m weird and stuff.
Most of these shows pay residuals to actors, writers, directors, and production companies based on formulas of how many subscribers the service has. Notably, none of the services are willing to publish detailed viewership statistics, even privately to creators, so the shows have to pay the same amount regardless of whether 1 person is watching or 1 million people are watching every day.
Rather than throw good money after bad, the services would rather take the show off entirely and not have to pay any residuals going forward. Then, with the show/movie making no money going forward, they get to write down the fair value of that intellectual property, which also saves the parent company on taxes.
Its also worth noting that their focus is on new subscriptions rather than retention, and a sort of “originate then cancel” model has developed from that. They create a new show, the hype from that new show drives new subs, they cancel the show to save money on residuals and to dedicate production funds to originating new shows, a certain percentage of the people who subbed for just that show stay subbed, their sub numbers go up
Most of these shows pay residuals to actors, writers, directors, and production companies based on formulas of how many subscribers the service has.
wait what I thought people are on strike because this ISN’T happening.
The current residual formulas are based on subscriber counts for the whole service (which all the streamers publish to shareholders and the public), not the number of viewers or hours viewed or any statistics that have anything to do with the specific show/movie itself (which the streamers refuse to release even to content creators and producers).
The strike negotiations want bonuses based on actual streaming performance, but the streamers are resisting anything that might require them to actually disclose numbers.
If this is accurate, then it would make a hell of a lot more sense. But… it sounds like these “residuals” need to be payed out differently because this sucks for consumers and… honestly… I think for those that poured themselves into making the content in the first place.
This is a huge point of contention in the current strike negotiations in Hollywood. Take, for example, this article:
SAG-AFTRA has proposed a bonus on top of the standard residual for the most-watched shows. But the AMPTP has refused to go along with that.
One of the challenges is getting a common metric that would work across all the streaming platforms. Each platform measures views differently, and they also consider that data top-secret.
. . .
Under the current formulas, streaming residual payments for all three guilds are based on a pre-determined compensation formula that declines over time as the TV show or movie ages. Platforms are sorted into subscriber-based tiers, with the higher tiers paying a higher residual. But the payments are the same regardless of the popularity of a show.
Will this coincide with their price rise?! Less stuff for more money! Sounds correct.
So it’s a tax thing.
The specifics of the tax and accounting issues at play here are beyond me, but it seems to be related to how big the value of the stuff you offer is versus how much of the cost you can write off as a loss.
The Guardian talks about it today and summarizes the whole process as “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.”
It’s all fake, dumb monopoly money stuff and it sucks. Somebody track down an actual corporate accountant who can explain the process better than me, though. It’s probably an interesting bit of detail to learn about.
This is what I had heard at some point. It’s a tax thing. Even though there are no details, it makes more sense to me now. Reduced value == less taxes. Would love to hear the guts if this… but also at the same time pulling out hair. So much blood, sweat, and tears going into producing something only having it then wiped from existence. smh.
And I hadn’t realized that Westworld was axed too. For a show that made such a huge hubbub and then to remove it entirely?! Ugh
It’s because they take the value of the shows they remove and mark them down as a straight loss, it’s a ridiculous loophole. They are literally saying, “I have this thing that’s so valuable, but I ‘accidentally’ threw it away, it’s worthless now, I need to mark this down as a loss.” They are destroying their own products for tax purposes.
The Discovery channel boss started this trend when he cancelled that Batwoman movie, and now other streaming corps are following suit. Hopefully the law will catch up to prevent this kind of trickery, but for now it seems they are doing everything they can to reduce costs because they rushed to steal Netflix’s lunch without a solid business plan.
It’s not about saving money on the backend, it’s about not bombarding people with terrible shows like Netflix does. They’re trying to trim the fat so that all you see are quote unquote bangers. For instance, the Willow show was hot garbage.
Hot garbage they spent a whole lot of money on that could still be served without ever showing on the main title screens. They clearly had to have made a determination that the show would cost them more to keep it available, even though it doesn’t entirely make sense to me how that all works.
This thread isn’t touching on the biggest impact which is being able to write down or impair these assets that are taken off streaming or shows in production that are cancelled (for Warner’s an amount in excess of $3B) - the impaired asset value is then taken as a loss which reduces the company’s tax burden.
I won’t pretend to understand corporate accounting at all, but if a show is costing them more money than it’s supposedly bringing in, how does it actually have any value as an asset in the first place? Can they literally just deduct the cost of production?
I guess I’m trying to imagine an analogous physical example. If a business spends $10,000 on a widget machine, but after several years it deteriorates to the point of being functionally useless and worth only $100 for parts, if they then throw it out, can they write off the $100 it’s now valued at, or the $10,000 they originally paid? If it’s the $10,000, can that expense not be deducted at purchase, and they have to wait until the actual object is disposed of?
Physical equipment is depreciated at a specific schedule based on that asset’s useful life. If you have a widget machine that costs $10,100 and is expected to last 10 years before being scrapped for $100, you can use a straight line depreciation of $1,000 per year.
But 5 years in, if the widget machine is destroyed, and the remaining scraps are only worth $100, then you can write down the $5,000 loss against your income, taking that tax benefit now instead of over the next 5 years.
If it’s the $10,000, can that expense not be deducted at purchase, and they have to wait until the actual object is disposed of?
No, they can’t deduct the purchase price because it’s not actually a loss of income. If they bought something that doesn’t lose value over time (a chunk of gold, a famous painting, some foreign currency, or a parcel of land), the amount they paid isn’t a “loss,” because they have a valuable asset after the purchase, so they’re not any poorer after the transaction.
Well, I think there is a question too of the value that theses assets have when brought directly to streaming and the reason we’re seeing studios start to rethink this strategy and schedule more theatrical runs
However from what you described the scenario is similar and these situations also occur with more traditional assets, for instance a manufacturer who brings a product to market that significantly underperforms because of an unforeseen event, if the assets market value drops below what has been accounted for they write down that difference as a loss. This loss offsets other gains the company recognizes and therefore rescues their tax burden. Consumers are able to take advantage of this as well if they experience a loss in their investments (capital losses)
For businesses and consumers the ability to write down losses encourages additional investment, and the highly subjective nature of valuation allows companies like the studios to use creative strategies to offset other costs like Discovery’s acquisition of Warner Media
Yes, this is what I was thinking was the matter. And someone else in this thread posted at a guardian link saying something to the same effect. It’s still mind-boggling to me that to save money the answer is to remove everything completely. It feels like these big production companies are failing people and their use of the tax system is furthering that so they can save money. It just seems strange that they have to axe a show from existence to be able to prove it as a loss to the government.
