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More than a billion dollars’ worth of swordplay, sorcery and sex is on its way to a small screen near you.
On August 22, Warner Bros Discovery launched House of the Dragon, a spin-off from its racy smash-hit, Game of Thrones, made at a reported cost of more than $215 million.
Hot on its heels, on September 2, Amazon Prime Video will release The Rings of Power, a more chaste but pricier drama based on the Lord of the Rings books. With a rumoured price tag of around $670m, Amazon’s offering will be the most expensive piece of television ever made.
This will make for an epic ratings battle. But it is also part of a longer-running war that pits old Hollywood studios against new streaming upstarts.
Warner Bros will celebrate its 100th birthday next year. Amazon, which makes its money from e-commerce and cloud computing, launched its video sideline only five years ago.
As the streaming wars intensify, each side believes it has the advantage.
Lately the dragons of old Hollywood have gained ground. Investors flocked to streaming specialists during lockdowns, but have lost interest as new subscribers have dried up.
Netflix, which once talked of a potential market of 800 million households, appears to have stalled at 220 million and has seen its share price fall by 60 per cent this year. On August 10, old Hollywood claimed a symbolic victory when Disney announced it had overtaken Netflix, with 221 million streaming subscriptions.
That figure double-counts subscribers to Disney’s various services, and ignores the fact many are in low-paying countries like India. But it has banished any doubt that ageing studios can play the streaming game.
Hollywood’s old hands are also refocusing on the business of making money, after two expensive years of chasing subscribers. Disney says losses on its main streaming service, Disney+, will peak this year before turning a profit in 2024. A steep price rise, beginning in December, will help.
On a recent earnings call David Zaslav, Warner’s new boss, bluntly criticised the old approach of “spend, spend, spend and then charge very little”. Warner will aim for its streaming business to generate a gross operating profit of $1 billion by 2025, he said. “If we do that, I don’t really care what the (subscriber) number is … We want to make sure we get paid.”
Old media formats will play a role. Cinemas, whose worldwide takings fell by 80 per cent in 2020, are open again, even if the box office is still not what it was.
But Paramount, a 110-year-old Hollywood dragon, held back the release of blockbuster Top Gun: Maverick during the pandemic and was rewarded in May with a box office run of more than $1.4 billion. Warner, which in 2021 released all its films on its streaming platform at the same time as they launched in cinemas, has gone back to exclusive theatre runs.
Theme parks are full again, too, with Disney’s American ones generating record revenues and margins. Even broadcast and cable TV, long in decline, look like relative havens as the streaming business gets tougher.
“We effectively have four, five or six cash registers,” Mr Zaslav told investors. “And in a world where things are changing, and there’s a lot of uncertainty and there’s a lot of disruption, that’s a lot more stable and a lot better than having one cash register.”
That may be a convincing argument against an upstart like Netflix, which depends on streaming. The trouble for old Hollywood is that some of its new competitors have bigger and more varied cash registers.
Warner’s path to profit involves drastic cuts — it has already scrapped its streaming news service, CNN+, and canned unfinished productions including Batgirl.
Amazon shows no sign of belt-tightening. Besides Rings of Power, it recently bought Metro Goldwyn Mayer, the studio behind James Bond, for $12.2b and acquired rights to America’s NFL for a reported $1.4b a year. Bank Morgan Stanley estimates Amazon will spend $23b on media content this year. Netflix spent $20b. Next year Amazon’s spending could reach nearly $29b.
Unlike the old Hollywood dragons, some new streamers don’t even need to get paid, in Mr Zaslav’s words. Amazon Prime Video exists to keep people signed up to Prime, whose main benefit is free delivery of Amazon purchases.
Apple’s steadily expanding tv+ service is geared towards keeping customers in its ecosystem of phones and computers, where the firm makes its real money. The video services from Amazon and Apple also provide real estate for advertising, a business in which both have ambitions to grow.
Old Hollywood is fighting back, offering viewers bigger “bundles” of content at a reduced cost. In the US, Warner plans to combine its main streaming service, HBO Max, with Discovery+ next summer. Disney is experimenting with discounted packages of services like espn+ and Hulu; some wonder if entry to its theme parks could one day form part of a Disney mega-bundle.
Yet Hollywood’s new rivals offer bundles of a different sort. Apple’s video vault is far smaller than that of Disney or Warner, but its “Apple One” package includes not just TV but music, games, storage, news and fitness. Amazon Prime comes with a similarly eclectic bunch of benefits. As households look for savings, deals like these may prove tempting.
As competition for viewers intensifies, the battle between old and new Hollywood is proving as bloody as an episode of Game of Thrones.
For consumers, who have more choice and more deals than ever, it is just as entertaining.
