Tearing down the

There was a time in the recent past when many US studios and streamers were convinced the path to direct-to-consumer (D2C) success could, and should, be travelled solo.

In 2018 and 2019, as the traditional US studios retooled their operations around streaming in a frantic bid to chase runaway leader Netflix, many believed curtailing or ceasing their third-party licensing regimes altogether would give them bigger libraries with which to lure subscribers to their soon-to-launch D2C offerings.

The ‘walled garden’ thesis – which was employed to greater and lesser degrees by Disney, WarnerMedia (now Warner Bros Discovery) and ViacomCBS (now Paramount Global) – dictated that keeping content within your own ecosystem was the smart long-term play. The trade-off, however, was that it meant leaving hundreds of millions of dollars, maybe more, in potential licensing fees on the table.

It was a sacrifice that most of the larger studios were more than prepared to make. After all, they had been down this road before when they licensed some of their best content to Netflix between 2010 and 2017. To begin with, the licensing cheques were hefty and well received, until it became apparent that Netflix was using rented content to amass a potentially unassailable lead in the streaming wars.

And so they turned off the taps – some completely, some less so – ushering in the walled garden era of streaming.

But it wouldn’t last. Fast forward to 2023 and the subscription streaming business has lost its lustre in spectacular fashion. After Netflix lost subscribers in successive quarters in 2022, its stock price went into freefall, dragging many others with it.

Studios and streamers left hundreds of millions of licensing dollars – and maybe more – on the table as they sprinted to acquire D2C scale. Now they are slamming on the brakes and changing course.

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including Warner Bros Discovery (WBD) and Disney are also sitting on mammoth piles of debt.

The grim economic realities have triggered a drastic response from the studios.

WBD president and CEO David Zaslav was the first to pull the plug, cutting thousands of jobs across the enterprise, scrapping development slates, cancelling completed shows before they had aired and removing others from streamer HBO Max. Paramount Global followed suit with a raft of show cancellations, restructuring and a cost-savings plan that includes the integration of Showtime and Paramount+ across both linear and streaming in the US. Disney, which posted D2C losses of US$1.1bn in the first quarter of fiscal 2023 alone, is planning to cut 7,000 jobs and reduce nonsports content spending by around US$3bn. Meanwhile, NBCUniversal’s US streamer Peacock is also expected to lose around US$3bn in 2023.

The severe cost-cutting measures have meant that third-party licensing is firmly back in the discussion. The cuts have also initiated a period of frantic and interesting deal-making that even 18 months ago would have been considered unthinkable.

Netflix dropped Neil Patrick Harris comedy Uncoupled

Now, instead of subscriber growth, Wall Street wants to see profits – and pronto. The only problem is that, with the exception of Netflix, all are hemorrhaging billions of dollars in D2C investments at a time when the erosion of traditional TV revenue is accelerating and subscription VoD lling the gap. Studios

SkyShowtime, the European streaming joint venture between Paramount Global and Comcast, agreed a deal to acquire exclusive European rights to 21 HBO Max European originals from WBD.

Meanwhile, in the US, the cuts and cancellations initiated a cycle of shows being axed by one network or platform, only to be rescued by a competitor. Showtime, for example, saved the Neil Patrick Harris comedy Uncoupled after it was cancelled by Netflix. Psychological thriller Ripley is reportedly headed in the other direction, with Netflix in talks to acquire the show after Showtime scrapped it – despite having filmed the first season. Another axed Showtime series, Three Women, was picked up by Starz.

New deals are beginning to take place in the AVoD and free ad-supported streaming TV (FAST) space, too. WBD recently made agreements with both Tubi and The Roku Channel to place more than 200 titles on AVoD and FAST channels in the US, including big-budget HBO drama Westworld, HBO Max’s Raised by Wolves and reality show FBoy Island.

Across the board, studios and streamers are reversing course on several major fronts. Most notably, advertising is being fully embraced by all the streaming