Unauthoritative Pronouncements

Disney announced yesterday that they would be ending their distribution deal with Netflix and starting their own service for Disney and Pixar fair. Bob Iger, the CEO of Disney, isn’t sure about where the Marvel and Star Wars properties will wind up. Peter Kafka at Recode has the relevant portion of Bob Iger’s statement in his piece on the announcement.

My guess is that he would like to see if it would be possible to sell Star Wars and Marvel streaming access separately, but aren’t yet sure if it would be wise to charge extra for that. ESPN, also owned by Disney, has been exploring an ESPN streaming service that’s designed not to compete with their cable offerings, but to offer something extra for an extra fee. How Disney’s streaming package will compete with their various cable offerings (like The Disney Channel, and Disney XD) remains to be seen.

Even when it comes to movies, Disney has a service called Disney Anywhere that mirrors purchased movies on all major platforms, as well as providing an app to stream them directly if you so choose. What impact would a streaming service have on digital movie sales? Will they want to keep Disney Anywhere, and have their new streaming service offer only a portion of titles that rotate in and out like Netflix? (My guess is “duh” but we’ll see.)

Thanks to extensions in copyright law, and a series of very large acquisitions, Disney owns your childhood, and your children’s childhood, and their children’s childhood. That isn’t simply because of their ownership, but because of what a good job they do at keeping those properties vital and active in popular culture. So what can they get away with parceling and selling in various ways?

Of course that’s what everyone is usually worried about when it comes to streaming. How can these companies turn access to their media library into as much recurring revenue as possible while maintaining as much existing revenue as possible? At what point do they sacrifice some revenue in one area and trust that they will make it up in another?

Indeed, the stocks for Walt Disney and Netflix both took a tumble over concerns about that revenue protection. But the whole market was down because everyone was worried about something else too.

U.S. and global stocks opened lower Wednesday after U.S. President Donald Trump warned North Korea about facing “fire and fury” if it doesn’t stop threatening the U.S. The broad-based S&P 500 stock index opened about 0.3 percent lower.

Maybe the Disney Vault can be repurposed as a fallout shelter?

Anyway, I digress, let’s discuss protecting that revenue and what it means for consumers who live in a Fantasy Land of less-expensive cord-cutting. How are the streaming apps on your phone or TV paid for?

• There are services that are specific to a cable/satellite/OTT package (FX, HGTV, Food Network).
• There are services that are duplicates of a cable/satellite/OTT package (HBO, Showtime).
• There are services that exist with partial overlap (CBS All Access, Hulu).
• There are services that exist with no equivalent (Netflix, Amazon).

These are also monetized differently.

• Part of a cable/satellite/OTT subscription on a monthly, or yearly plan with early cancellation fees.
• Paid for directly with a recurring, monthly subscription.
• Ad-supported, or partially ad-supported with a recurring subscription.

As people pick through the various things available to them they will do the math on what they think is worth it in each of those categories. Do some ad-supported streaming services offset the expense? Do they abhor ads and will only consider monthly subscriptions? Do they need cable TV and budget very little for additional streaming services?

After a certain number of monthly subscriptions, you do run into issues with expense — but hey, it takes money to make TV and movies happen, people.

The silver lining is that monthly, recurring subscriptions are very easy to cancel on various platforms, like Apple TV, Roku, or the Fire TV. People can drift in and out of paying each month. Though most people do just stay subscribed year-round. Effectively your a la carte services can be different month-to-month without penalty you. That is very unlike the traditional cable or satellite TV experience, with high-pressure telephone negotiations, equipment installations, and on-site visits.

So it’s not all bad news! Look how flexible that is! And in Darwinian fashion we will see what the market will sustain.

The one, major downside I see is that some executives will realize that it’s bad when people cancel, and they want people to not do that by shifting the threshold from monthly to yearly subscriptions, which people would be less likely to cancel. They are also less likely for people to start, so I don’t think you’ll see it until providers see saturation, because why steer people away? There will, of course, be an emphasis on a yearly “discount”. Sign up for one year and get a percentage off.

Amazon has done the reverse of this, where they used to offer Prime memberships exclusively as yearly memberships, but started offering month-to-month Prime memberships, priced higher per-month, to try and get more people in the door. There’s even a tier for Prime-Video-only at a month-to-month rate of $8.99.

I bet the pricing and programming research going on inside Disney is bananas right now.