Media giants are realizing what Netflix already knows: Streaming is expensive.
The costs are adding up as Walt Disney, WarnerMedia and Discovery build their own online video services to make up for shrinking cable and DVD businesses. Those investments, coupled with efforts to pull back content from Netflix and other online services, mean revenue and profit will be under pressure for years.
“Starting a direct-to-consumer service takes an incredibly strong stomach for losses,” said BTIG analyst Rich Greenfield. “If you want to win, it’s very expensive.”
Deep-pocketed buyers like Netflix and Amazon initially helped media companies survive the decline in DVD sales and rentals by providing a new outlet for movies and TV shows. But now they’ve become a threat – luring customers away from lucrative cable subscriptions – and have forced major media companies to develop their own online services.