Disney pulling all content from Netflix, launching own streaming service

[tjkraz]

What we would do would be to just do without. We cut the cord on February 9th of this year, and to be honest, we really haven't missed it.

So the network has nothing further to lose from you. You're a cord cutter. They've already lost all revenue from your household (plus millions of others yet to come.)

What they're gambling on is that while you are unwilling to pay $100 per month for a 200-channel cable package, you might be willing to pay $15 per month just for ESPN. Or $6 per month for FXX. Or $15 per month for HBO. Or $6 per month for CBS.

If they create their own streams, they run the risk of losing viewership and eventually, going away!

I don't think the cable/sat model will ever completely disappear. There will always be households who want a great variety of programming and are willing to pay for it. And you can expect to pay relatively small fees on a per-channel basis when buying in bulk.

But what's happening is networks are shying away from portals like Prime and Netflix which (until now) have provided a wide variety for a small fee. Even though a dedicated Disney streaming service won't attract the 100 million subscribers Netflix has, Disney is betting that their revenues will still be larger than the small slice they're getting of the $10 monthly Netflix fee.

Disney/ESPN can't stop people from saying "I don't want your content under any circumstances." But what they can do is offer options: Pay $100 or so per month as part of a bundled cable package or pay $10-15 per month a la carte for the small number of networks you prefer.

 

[DaisyJ]

Dear Disney, Please purchase Netflix.

Disney can't afford Netflix.

 

[TwoMisfits]

So the network has nothing further to lose from you. You're a cord cutter. They've already lost all revenue from your household (plus millions of others yet to come.)

What they're gambling on is that while you are unwilling to pay $100 per month for a 200-channel cable package, you might be willing to pay $15 per month just for ESPN. Or $6 per month for FXX. Or $15 per month for HBO. Or $6 per month for CBS.



I don't think the cable/sat model will ever completely disappear. There will always be households who want a great variety of programming and are willing to pay for it. And you can expect to pay relatively small fees on a per-channel basis when buying in bulk.

But what's happening is networks are shying away from portals like Prime and Netflix which (until now) have provided a wide variety for a small fee. Even though a dedicated Disney streaming service won't attract the 100 million subscribers Netflix has, Disney is betting that their revenues will still be larger than the small slice they're getting of the $10 monthly Netflix fee.

Disney/ESPN can't stop people from saying "I don't want your content under any circumstances." But what they can do is offer options: Pay $100 or so per month as part of a bundled cable package or pay $10-15 per month a la carte for the small number of networks you prefer.

But the one huge advantage you get from letting Netflix or Hulu pay you for content...you have nothing to lose...you are paid upfront for everything (and if you're smart or powerful, maybe you even negotiate a "per view" fee on top of the set fee per show or you negotiate non-exclusive deals to get paid by someone else to offer it, too)...but if you run your own fee for service, you have to set up the entire side of that business - sales, tech, membership support, billing, etc...you took on an enormous fixed cost you have to cover on top of your content that you are now selling just yourself...

The NFL has seen it's not as easy or profitable to do it yourself when everyone will still pay you enormous sums just to get a piece of your content...

 

[lockedoutlogic]

The NFL has seen it's not as easy or profitable to do it yourself when everyone will still pay you enormous sums just to get a piece of your content...

That's an excellent point...

For Those that are unaware...the NFL started running the production of their Thursday night games...and then ran for the hills as fast as they could...making tv is expensive

They pay cbs to do it

 

[tjkraz]

But the one huge advantage you get from letting Netflix or Hulu pay you for content...you have nothing to lose...you are paid upfront for everything (and if you're smart or powerful, maybe you even negotiate a "per view" fee on top of the set fee per show or you negotiate non-exclusive deals to get paid by someone else to offer it, too)...but if you run your own fee for service, you have to set up the entire side of that business - sales, tech, membership support, billing, etc...you took on an enormous fixed cost you have to cover on top of your content that you are now selling just yourself...

The NFL has seen it's not as easy or profitable to do it yourself when everyone will still pay you enormous sums just to get a piece of your content...

No question it's a risk. But Disney already operates a similar service in the UK. They must have some research data which supports this approach. They're buying a big stake in a company spun off of MLB Advance Media, one of the leaders in streaming tech. Regardless of whether Disney creates these stand-alone services to market direct to consumers, they still need the robust streaming platform to support ESPN, ABC, Disney Channel and all of their other network apps.

 

[lockedoutlogic]

They must have some research data which supports this approach.

Yeah...the research says that $0.40 of every one of their take home $1.00 has come from espn...and that math doesn't work anymore.

Look...they may figure out a way to do this...and maybe they'll pull off a big rebound here...

But I see more and more creeping in of the "this is smart/proactive" for the disney BOTDers...and that is just not the case when it comes to the disney networks.

They have really put themselves in the crosshairs here...and it's their fault.

 

[tjkraz]

I'm saying if those stations went direct and bypass direct tv, Verizon, Comcast, timewarner (whatever it's called now)...they'd devalue themselves by cutting off the fees and advertising paid by those cable/satellite operators.

And I'm saying the RSNs may try to have their cake and eat it too. They want both revenue streams...cable/sat and direct to consumer.

ESPN isn't going to pull its content from DTV, Comcast, TW or any others. However ESPN wants to reclaim some of that lost cord cutter revenue by offering a direct option.

The only ones Disney risks alienating are the cable/sat companies but I don't see where they have much recourse. Particularly with Disney, given the breadth of content they control. If Comcast tells Disney to "shove it", at a minimum they lose access to all of the ESPN channels, all of the Disney Channels, Freeform and ABC. (Subject to whatever contract duration remains.) Losing those networks hurts Comcast more than it hurt Disney...especially if Disney is ready and willing to sell the nets a la carte.

 

[jknezek]

From a Forbes article: " Disney is betting on its new service to make more than the $300 million in revenue it gets from Netflix."

Kind of an interesting short article with a different take: https://www.forbes.com/sites/maddie...-king-for-kids/?source=bloomberg#75a2fdbc29ed

 

[lockedoutlogic]

And I'm saying the RSNs may try to have their cake and eat it too. They want both revenue streams...cable/sat and direct to consumer.

ESPN isn't going to pull its content from DTV, Comcast, TW or any others. However ESPN wants to reclaim some of that lost cord cutter revenue by offering a direct option.

The only ones Disney risks alienating are the cable/sat companies but I don't see where they have much recourse. Particularly with Disney, given the breadth of content they control. If Comcast tells Disney to "shove it", at a minimum they lose access to all of the ESPN channels, all of the Disney Channels, Freeform and ABC. (Subject to whatever contract duration remains.) Losing those networks hurts Comcast more than it hurt Disney...especially if Disney is ready and willing to sell the nets a la carte.

That may be...

But I think the audience we are talking about...the "e" generation...is wise to that kind of saturation/bait and switch type tactic.

And those that aren't - those who know who Gerald ford is - will die with coax connected...so what does it matter to them?

 

[lockedoutlogic]

From a Forbes article: " Disney is betting on its new service to make more than the $300 million in revenue it gets from Netflix."

Kind of an interesting short article with a different take: https://www.forbes.com/sites/maddie...-king-for-kids/?source=bloomberg#75a2fdbc29ed

That doesn't really seem like a lot of revenue for the streaming service to me...it's a lot for them to collect but won't stem the Tide of the disney channel and espn drop

 

[tjkraz]

Yeah...the research says that $0.40 of every one of their take home $1.00 has come from espn...and that math doesn't work anymore.

Look...they may figure out a way to do this...and maybe they'll pull off a big rebound here...

But I see more and more creeping in of the "this is smart/proactive" for the disney BOTDers...and that is just not the case when it comes to the disney networks.

They have really put themselves in the crosshairs here...and it's their fault.

2011 isn't coming back. No denying that. But ESPN got fat when the gettin' was good. I'm not sure we can fault them for that. Streaming technology and high quality broadcast TV made this cord cutting something of an inevitability. I can't conceive of a business model which would have allowed them to make similar revenues in a more sustainable fashion. Yes, people are put off by the high cost of cable. But even if those rates were lower, alternatives like Netflix, Hulu and Prime would have filled the gap for many.

We could justifiably scrutinize some of the college and pro sports deals that ESPN signed. But it was those very deals which allowed ESPN to raise its subscriber fees so much higher than any other network. Without deals for Monday Night Football and the college BCS, ESPN probably isn't getting $7+ per subscriber, per month. And they'd still be bleeding subscribers.

 

[jknezek]

That doesn't really seem like a lot of revenue for the streaming service to me...it's a lot for them to collect but won't stem the Tide of the disney channel and espn drop

No. But if that's all the contract is for you can see why they decided to strike out on their own. That's small potato money for big content.

 

[tjkraz]

But I think the audience we are talking about...the "e" generation...is wise to that kind of saturation/bait and switch type tactic.

RSNs are the only way to follow local sports teams. My teenage son streams mostly on his cell phone, but that requires RSN credentials linked to our TV plan. And he'd probably kill me in my sleep if I cancelled the service and took away access to his Cleveland Indians.

The "game of the week" offerings on networks like ESPN, Fox Sports, MLB Network, TNT, NBA TV and others are more expendable for fans, but that's most are wise to also have desirable event programming like playoff contests, ESPN has big college football bowl games, NCAA March Madness, etc.

 

[umichigan10]

The proposed system also doesn't seem like it'll work. Having to pay for a separate espn runs counterintuitive to what they need, which is more subscribers. It'd make sense to package it with the Disney package so to speak as a way to increase the numbers following.

This also doesn't address the main issue which is their television model for shows is boring and stale, not to mention redundant to the 10th degree

 

[tjkraz]

The proposed system also doesn't seem like it'll work. Having to pay for a separate espn runs counterintuitive to what they need, which is more subscribers.

You can get ESPN as part of a cable/sat/OTT program package and soon it will be available a la carte. I don't see how that could hurt their total subscriber numbers.

It'd make sense to package it with the Disney package so to speak as a way to increase the numbers following.

Perhaps. But they'd want to charge more for a combined ESPN/Disney Channel program package than either separately. Might be easier to just appeal to the separate audiences at lower fees for each. Or maybe do a bundle rate.

 

[jkh36619]

I cut the cord 3 years ago and have not looked back. I pay for Netflix and Prime(really for the 2 day shipping. The movies are a plus) and am very happy. If Disney cuts some movies from these 2 ill survive. I'm not paying for anything else. What I don't understand is if I have to pay ala carte for all these individual subscriptions at $10 a pop, which seems to be trending, why wouldn't I just go back to cable to have it all in one place?

I can see it 20 years from now.... Some company takes all of these individual subscriptions and "bundles" them together and delivers it to you in a single solution over a coax connection. Brilliant!

 

[tjkraz]

I cut the cord 3 years ago and have not looked back. I pay for Netflix and Prime(really for the 2 day shipping. The movies are a plus) and am very happy. If Disney cuts some movies from these 2 ill survive. I'm not paying for anything else. What I don't understand is if I have to pay ala carte for all these individual subscriptions at $10 a pop, which seems to be trending, why wouldn't I just go back to cable to have it all in one place?

Cable will remain an option. But these services appear to be an attempt to recapture all of the revenue between the two extremes: the people who don't want to spend $100 per month, but are also willing to spend more than $0 per month.

Subjectively, Netflix is losing a lot of value to me. I didn't watch much Disney programming on Netflix so that's pretty much out of the argument. Still, slowly but surely they keep losing older catalog programs that I liked revisiting from time to time. Part of that is Netflix' fault for putting more $$ toward originals, but also networks are choosing not to renew those deals. HBO has already said it will not re-up with Amazon. They want all of that material exclusive to their $15/mo service. Now that FX is starting its own service, I fully expect that legacy programs like The League, Sons of Anarchy, The Americans, Archer and others will eventually drop off Netflix and Prime. AMC is testing a platform so the likes of Breaking Bad and The Walking Dead could disappear when the contract ends.

If the networks get their way, instead of reflexively paying Netflix that $10-12 per month, some consumers will begin to see a combination of (for example) FX and AMC as a better fit for their programming tastes. Others will pay ESPN $15 per month for the sports. And so on. As long as they're under the going rate for cable, many consumers will view it as a win.

 

[adam.adbe]

I cut the cord 3 years ago and have not looked back. I pay for Netflix and Prime(really for the 2 day shipping. The movies are a plus) and am very happy. If Disney cuts some movies from these 2 ill survive. I'm not paying for anything else. What I don't understand is if I have to pay ala carte for all these individual subscriptions at $10 a pop, which seems to be trending, why wouldn't I just go back to cable to have it all in one place?

Disney is hoping that either:

a) there's enough soup still in the bowl after cord-cutters have signed up to two or three of Netflix/Hulu/HBO/Amazon/Starz/PS/DirecTV et al for a Disney service which will offer some amount of sports, making this a purely don't-leave-money-on-the-table play.

b) there isn't, but the loss of Disney slows Netflix's roll sufficiently (and gives everyone sufficient jitters) that streaming services begin to die off, at which point Disney will kill its own, and go back to getting fat off of cable fees.

It's also hoping that its investors forget that:

c) Comcast owns a lot of its own media, and also the pipes over which Disney wants to stream its stuff, so one way or another Comcast is the Piper and Disney *will* end up paying.

d) If people (especially kids) aren't exposed to Disney stuff, their non-sports portfolios (parks/merch etc) will suffer.

 

[jkh36619]

I still think Disney's play is to just unload ESPN. Heck, I think they should unload ABC and get out of the television ownership business all together. Take your beating and move on.

 

[TwoMisfits]

I still think Disney's play is to just unload ESPN. Heck, I think they should unload ABC and get out of the television ownership business all together. Take your beating and move on.

I 100% agree...spin the whole thing off or sell it, and get out of tv and focus on content, merchandise, and parks, the areas you are actually amazing at...