Last week was a turning point in the business model of streaming video. On Tuesday, category leader Netflix who has for years adamantly refused to accept any ads, did an about face. Faced with a dismal quarterly earnings report co-CEO Reed Hastings said he would consider introducing a lower-priced, ad supported tier in the near future. On Thursday, Warner Media Discovery said they were shutting down CNN+, just weeks after the standalone streaming service was launched. The announcement came in the aftermath of Discovery finalizing its acquisition of Warner Media, CNN’s parent company.
The loss of subscribers with Netflix which they expect to continue into second quarter and the abrupt termination of CNN+ in just over one month raises financial questions about the future of streaming video. During the week of April 18, when both announcements were made, the share price of Netflix was $215.52, a decline of 36.8% from the previous week, the largest percentage drop-off of any publicly traded company. (The share price of Netflix had been $700 in November.) At the same time, the share price of the new WBD fell to $20.57, a decline of 17.3%, the fourth sharpest drop-off.
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