It’s no secret that Disney will be launching it’s own dedicated streaming service soon. On their most recent investor call, Disney CEO Bob Iger took questions and dropped what I believe to be the pivotal reason why Disney will win big with their streaming solution. Iger told investors that Disney does not plan to compete at scale with their offering. Meaning, they aren’t looking to flood their service with every property they have. Instead, they’ll strategically launch content to focus on branding as a whole. So why is this a big deal and how will it allow Disney to withstand the losses from cord-cutters? Let’s break this down.
According to a recent study, over 22 million Americans would have cancelled their cable subscription by the end of 2017, a trend known as cord-cutting. If you’re in the tv business, this should scare you. But for Disney, this will be a speed bump on their path to a new and ridiculously lucrative revenue stream. The Mickey Mouse company will survive these market trends because of their willingness to not only accept new media norms, but create their own delivery system.
Disney has been laying the groundwork to succeed in the streaming world for years now. Their most recent tell was the accelerated purchase of BAMTech, a company that was spun off from MLB Advanced Media. The team here are considered wizards when it comes to streaming digital content to millions of viewers. This acquisition gives Disney a means of delivering content to their fans in a fast and reliable manner. With BAMTech, Disney owns a fleet and all they need is an army. Luckily, that isn’t far behind either.
The Disney Army Is About To Get A Whole Lot Bigger
There aren’t many, if any, companies that can compete with the deep catalog of content Disney possesses. Sure, they have their classics along with a bunch of fresh characters from the Pixar vault. On top of this, the ownership of Lucasfilm and Marvel provide even more breadth and nostalgia. But their expanded library, from A&E to ABC, introduce much more diversity that’s only rivalled by the likes of Netflix. This is the army for the aforementioned fleet. And if it wasn’t enough already, this army is about to get a whole lot bigger.
In what can only be described as monumental, Disney is set to buy 21st Century Fox assets for $52.4 billion. This deal will see a whole suite of content exchange hands. A suite of IPs that include the X-Men, Alien, The Simpsons, Die Hard, Avatar, and much more. While many may see this as cause for concern for several reasons, there’s no denying that a deal like this will have huge economic and legal ramifications in the entertainment industry. However, I don’t anticipate this deal not going through due to anti-competitive reasons. Disney will leverage the fact that they’ll have to compete with the likes of Netflix and YouTube, who many would argue are monopolies in their respective categories (ie. paid and free). Again, the Disney army is only going to get bigger.
How Does This All Come Together?
So, how does all this come together? Disney has the means to build a portal to deliver high-quality content in a fast and reliable manner. Their huge catalog of content will provide ample resources to lure new users to their platform month after month. But their willingness to play the long game and strategically release content will lead to their inevitable success.
At first, early adopters and hardcore fans will sign on to see what you get as a customer. As the months progress, Disney will go ahead and release varied content to attract different tastes. You may even see a huge library dump all at once to trigger some impulse purchases (imagine all past seasons of The Simpsons to celebrate their upcoming 30th season). And don’t forget the opportunity of a major Disney release going straight to streaming, similar to what Netflix has been doing recently. The path is clear. The only thing that remains is execution. If they can keep people engaged, the cord-cutting trend will not negatively impact Disney in the long run.
While some journalists may focus on the whether or not Disney will catch up to Netflix, I believe all of this is about Disney surviving the next 100 years. Along with their spending spree, they’re continuing to hire left and right. And if that weren’t enough, Netflix CEO Reed Hastings has already admitted that Disney will do well in the streaming space. The real question is how well will Disney do? Will it be just enough to keep them profitable or so enormous that they’ll overshadow the current leaders? I believe the answers lie entirely in the hiring and execution that occurs over the next three years. Three years is also the amount of time left of Iger’s contract with Disney. How convenient.