Disney Could Face Nearly $2 Billion in Fees for Removing Content from Streamers as More Cuts Likely This Quarter
Disney Could Face Nearly $2 Billion in Fees for Removing Content from Streamers as More Cuts Likely This Quarter
Content cuts with a smile are still content cuts, as Disney’s production partners are finding out. The company has removed a long list of shows from Hulu and Disney+, following through on a promise made by Disney executives during its most recent quarterly earnings report.
In a filing made to the SEC last Friday, Disney said that it expected to incur a $1.5 billion impairment charge from the content removed thus far. Impairment charges are a one-time expense companies absorb to write down items and remove them from their budgets, so they don’t have to pay taxes on assets that are no longer valuable.
Disney also said it “currently anticipates additional produced content will be removed from its [streaming] and other platforms, largely during the remainder of its third fiscal quarter.” That means that more content cuts are likely coming in the next few weeks; the company estimates that it could rack up another $400 million in impairment charges on cuts still yet to come.
The $400 million figure suggests that Disney’s further cuts could be less dramatic in volume than what it has already removed. The withdrawal of these titles is a part of Disney’s larger strategy to stem the tide of big losses from its streaming platforms, which may have peaked, but are still in the range of hundreds of millions of dollars. Another tactic Disney plans to implement in that strategy is a price hike on its ad-free streaming tier which will take effect at some point this year.
Disney is at a crossroads with its streaming segment. Disney+ is one of the largest global streaming services, sitting at 157.8 million users worldwide despite two straight quarters of subscriber losses, mostly in India following the move from streaming Indian Premier Cricket matches to airing them on broadcast channels. The company is likely to purchase the 33% of Hulu that Comcast owns in 2024, and will reduce the friction between its two entertainment streaming services by combining them into a “one-app experience” this year. The company is also reportedly having substantive discussions with leagues and cable providers about launching a streaming version of the ESPN family of networks that won’t require a pay-TV subscription.
As one of the largest entertainment companies in the world, Disney feels more pressure than most to keep its financial situation optimal for shareholders. If you’re a fan of “Willow,” “The Mysterious Benedict Society,” or any of the other titles recently removed from a Disney streamer, the financial explanation as to why the show or movie is no longer available isn’t likely to assuage your bitterness. But Warner Bros. Discovery managed to use content cuts and price increases to stem its own streaming losses, and Disney is not going to sit idly by and lose money while a recipe for profit is sitting in the open for all to see.
Disney+
Disney+ is a video streaming service with over 13,000 series and films from Disney, Pixar, Marvel, Star Wars, National Geographic, The Muppets, and more. It is available in 61 countries and 21 languages. It is notable for its popular original series like “The Mandalorian,” “Ms. Marvel,” “Loki,” “Obi-Wan Kenobi,” and “Andor.”