The Disney and Netflix partnership was destined to revolutionize the entertainment landscape. Both had much to gain. Disney exposes a large audience to their most popular franchises while Netflix attracts growing number of subscribers. But if there’s one thing about Disney that people should know by now, it’s that they are not a company willing to play second fiddle in any industry.
From the box office to theme parks, Disney is the undisputed king. But where video on demand is concerned, that is a different story. Sure, four of the ten highest grossing movies (worldwide) are Disney-produced, but that pales in comparison to the streaming and cable revenue.
Netflix’s streaming services redefined the way viewers consume media to the point where cable television just seems like a distant memory. As a TV network, Netflix’s enterprise value is twice that of HBO and CBS combined. This year they announced having over 100 million subscribers. Netflix is definitely at the top.
Disney plans to change that.
Disney Split Drops Netflix Stock By 5 Per Cent
On August 8, whatever plans Disney had to acquire Netflix fell through and hastened their decision to enter the streaming business. More than that, Disney’s tactics shows an understanding of what Netflix has set out to accomplish.
They’re trying to create an alternative to a cable subscription with one streaming service, and they want to do it so fast that no one else in the world can compete.
Disney’s First Volley: ESPN
Along with the announcement that they are starting their own streaming service, Disney unveiled that their plan would include two streamers. One for family entertainment and the other for ESPN. Disney CEO Bob Iger said the ESPN service “will stream 10,000 hours of live sports annually that customers won’t get from the ESPN cable channel, including MLB, NHL and Major League Soccer matches as well as Grand Slam tennis tournaments and a plethora of college sports.”
Netflix Responds in Kind
Rather than allow Disney’s news to dominate the news cycle, Netflix retaliated with a clever, calculating and personal business move. Shonda Rhimes, creator of “Grey’s Anatomy” and “Scandal,” is moving from her home of 15 years to create shows and other content exclusively for Netflix. Strike hard, strike with measure, and strike at the heart of Disney’s ABC.
Disney won’t feel the loss for a while because they still retain the rights to air the hit shows that Rhimes helped create. But give it a few years before Rhimes begins to produce shows for Netflix.
This is, in a sense, a war. And Disney is in the process of hoarding munitions in preparation for their attack. Now, what better weapon when entering a streaming war with Netflix than acquiring one of the top companies in digital streaming technology, BamTech? BamTech has provided the streaming technology for HBO, WWE, NHL, PGA, and other successful entertainment companies.
Disney not only plans to use BamTech, but to own and control it.
Netflix Intimidation Tactics
Not one to shirk from competition, Netflix almost immediately announced that they would spend $7 billion on content in 2018. Before you groan “Not more Adam Sandler” (even though his original film, The Ridiculous Six, is the most streamed movie on Netflix), think about it. This means more money going into producing original content including hits like Stranger Things, Narcos and House of Cards.
Get Ready for Some Binge-Watching
The two sides are gearing up for an all-out war. However, Disney’s advantage that Netflix doesn’t yet have response for is live sports streaming. Disney plans to offer ESPN as a streaming service in some way, which will include MLB, MLS and NHL.
Don’t discount Netflix on that front. They might be planning some sort of sports-related deal to combat Disney/ESPN. It’s only speculation from my part, but this may well include bringing European soccer leagues under one umbrella for North American viewing audiences.
Or, perhaps for the American viewing audience, the most popular American sporting league: The National Football League.
There’s no shortage of options for Netflix right now and they have conquered some fierce competition in Blockbuster Video and Cable television. But Disney may prove to be different. As pieces move into place and strategies are made apparent, the question remains: will Disney take over as the dominant streaming service or just be another one of several paid streaming services?
Cable cutting has been a growing trend because of the high costs of cable packages. However, the proliferation of streaming services could lead to new problems that resemble the old.
Instead of paying a flat fee of $90/month for cable, viewers would pay for nearly a dozen services at roughly 10 dollars each.
Besides Netflix, there are Amazon Prime, VUDU, Sling TV, Roku, iTunes, Google Play, and Hulu. And this doesn’t include sports packages.
Throw Disney and ESPN into the mix, and disgruntled viewers will only have one place to avoid piling costs: piracy.
Alex Correa | The Edge Blog