Canceling Netflix

Warner Bros. Discovery, the newly formed entertainment giant, released extremely poor earnings. It has to look for growth businesses, and quickly. One place it continues to place emphasis on is streaming, which, until recently, appeared to be the solution to all media industry problems. As Warner Bros. Discovery launches even more new streaming services, the company most likely to be harmed is streaming leader Netflix. There are too many streaming services for Americans to subscribe to all of them.

After explaining that the media assets contributed from AT&T to the new Warner Bros. Discovery company were damaged goods, CEO David Zaslav listed a number of plans to get his businesses out of the ditch. One was a two tiered streaming strategy. One service would require paid subscribers and the other would be supported by advertising.

Netflix, on the roped because of its own challenges, will also introduce an ad supported service. It is too early to tell if the business will undermine demand for the older service for which people are required to pay. Netflix could undermine its own earnings engine.

Netflix challenges go well beyond the hobbled Warner Bros. Discovery streaming plans. Disney is also struggling with its rapidly growing Disney+. However, it remains one of the largest streaming services and a major competitor. It has to take market share from Netflix to grow.

Amazon Prime Video is Netflix’s biggest problem. It is as large as Netflix, and its parent has a much healthier balance sheet. Prime is also part of a suite of services that help’s Amazon’s e-commerce business. That is reason enough for its to underwrite Prime Video’s growth.

Finally, Apple has begun its own streaming service. Apple TV+ has been slow out of the gate and has a small library of content. But, Apple TV+ is part of the consumer electronics company plan to increase services revenue and hardware sales. Apple may have the best balance sheet in the world. Its ability to support a streaming service is nearly limitless.

Netflix is in trouble. The new services from Warner Bros. Discovery will make that even worse.

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