Tech

New streaming services will lose billions of dollars, media mogul Barry Diller says

Key Points
  • A day after HBO provided details for its HBO Max service, Barry Diller says that companies creating new streaming services are probably losing billions of dollars on them.
  • "There is no way around it," the IAC chairman says.
  • In addition to HBO, Comcast's NBCUniversal and Disney have new streaming services on the way.
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Companies with new streaming services are likely losing billions: Barry Diller

Companies that are launching new streaming services are probably losing billions of dollars on them, media mogul Barry Diller told CNBC on Wednesday.

"When the bills start getting paid and these public companies have to announce the losses that they're taking ... these losses by definition have to be in the billions," the IAC chairman said in an interview on "Squawk Box." "There is no way around it."

Diller, who helped create Fox Broadcasting Company and its motion picture arm, appeared on CNBC a day after AT&T's WarnerMedia announced details of its HBO Max service, and two days before Apple's streaming service goes live. The Disney+ subscription offering will debut in about two weeks.

The fresh entrants, including Comcast's NBCUniversal, are seeking to rival established players such as Netflix, Amazon and Hulu, which is controlled by Disney.

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.

The Disney+ (Plus) logo is seen displayed on a smartphone.
Rafael Henrique | LightRocket | Getty Images

"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.

Apple, on the other hand, should "get back to fixing the iPhone," he 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 $1 billion today."

Diller said he understands the desire of many legacy media players to retain their competitiveness against industry disruptors such as Netflix and Amazon. Until they came along, "essentially six companies" controlled media for nearly a century, Diller said.

"It's hard to compete, but of course they're trying. They want to get [control] back," Diller said.

"I don't think they will ever get it back," he said.

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

WATCH: CNBC's full interview with media mogul Barry Diller

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Watch CNBC's full interview with media mogul Barry Diller