Barry Diller told CNBC on Wednesday that legacy media companies are trying to compete in streaming with Netflix and Amazon, but the economics may not make sense.
HBO said on Tuesday that it will spend $4 billion over the next three years building HBO Max. It expects annual incremental revenue, from subscriptions, content and ads, to hit $5 billion by 2025, which is the year it should start to positively impact earnings.
While Diller said Disney is best positioned to compete with Netflix and Amazon, the new challengers all have a difficult road ahead, he said."Their business plan for them, I'd presume internally, makes sense because they've got to compete but the truth is I don't think they all really have to do so," Diller said. "Not in the same way, not in the concept of literally trying to equal Netflix whose spending, without any question, will quadruple anybody else's.
Diller said that NBCUniversal's service — because it will also have an ad-supported tier — may have a better chance at success. "It's much less risky. It's much more conservative, but it's ad-supported and so it doesn't have to really compete in trying to grab subscribers away in a rich subscriber market," Diller said.For all the new streaming services, the "costs are literally insane," he said. "Three television programs, three episodes of 20-each television programs will cost a $1 billion today.
Yet Diller said he understands the desire of many legacy media players to retain their competitiveness against industry disruptors like Netflix and Amazon, which shook up the business model. Until they came along, "essentially six companies" controlled media for nearly a century, Diller said.However, "I don't think they will ever get it back," he said.
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