A decade into the live-streaming revolution, the seams are emerging and the stitches are starting to appear.
The recent uproar over HBO Max removing a slew of episodes of series and movies from its platform amounts to unintended consequence #9789 for an industry transformed from the inside out by the digital turmoil.
It must be the position that Warner Bros. is seeking. Discovery to address it by lightening the burden of content is crystal clear to anyone who has worked in retail sales management. Simply put, HBO Max has a stock problem. The long-tail content theory that has fueled the struggles of streaming business with a focus on the support successes that have traditionally fueled the entertainment economy.
With the exception of mainstream Netflix, no network or platform in the 75-year history of commercial television has accumulated such a vast and deep library of content made available for public viewing on demand as HBO Max has done in its 27 months of existence. This means that no network has to deal with the real-world problem of managing the long-term cost of maintaining such a huge inventory.
In the world of retail, if a product is not sold, at some point it comes off the shelf to make way for something new. This has long been the case in linear television as well; If the show does not find an audience, the cancellation ax falls. However, in the past, if CBS or NBC shut down a show, the network wouldn’t have to keep shelling out coins to make it available on demand. But that was the norm in the live broadcasting arena.
The bill builds up quickly when the remaining fee costs for actors, writers, and directors are included — costs that run regardless of how many or how few people refer to a particular episode of an old series. There are also producer fees, music licensing fees, and countless other royalties that go into effect. Industry sources say the cost varies widely on a title-by-title basis, depending on the terms of the underlying deal, but there’s no version of a hold-up available to view on a platform that doesn’t incur at least tens of thousands of dollars in fees per series per year. For the lowest performing 30% of HBO Max’s active library, this adds up to tens of millions of dollars annually.
As Warner Bros. faces. Discovery has faced serious financial pressure after the merger, so there’s no doubt that easing the load on HBO Max is a natural place to make some savings. This move was also facilitated by the harsh reality of having virtually no viewership for the shows being removed. In some cases, recently pulled shows included episodes that had not garnered any views in a 12-month period. There is no spin in the long-tail theory – the feeling that niche content that drives passion and engagement can be as valuable or more than results of mass appeal – that can support an economic argument to keep spending to attract a number of views.
Netflix is certainly grappling with that same pressure as the streaming device adapts to an environment of slowing subscriber growth around the world. This dynamic has propelled Warner Bros. Discovery to work faster to remove content that did not get any effect. Much of HBO Max’s removal of about 200 episodes of “Sesame Street” was made from the platform. But a week later, hundreds of “Sesame Street” episodes are still available to watch, including the past 12 seasons and select old seasons.
If tens of millions of new customers sign in every year, it might make sense to keep that weird drama or offbeat comedy in the lineup because you never know what will play well in Peoria, Istanbul or Rio de Janeiro. The promise of vast archives of content available to consumers with a single click (or voice command) has been shattered by the tough reality of Warner Bros.’s balance sheet. Debt-burdened Discovery. Nobody can afford an all-you-can-eat buffet for $15 a month.
But media consumers young and old are now trained to expect anything and everything that is available somewhere and at a price. The jolt of content inventory cuts driving post-Q2 earnings may spur a renewed affection for traditional media like books and DVD sets among younger consumers as they absorb the shock of these real-world inventory management issues versus the endless promise of cloud storage.
One industry veteran likened the fluctuations in broadcasting over the past few months to a wave of stark analyzes of player stats and ROI for baseball players’ salaries in the early 2000s: “This business has become ‘Moneyball.'”
(Pictured: “Sesame Street”)
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