Two full days in June, Disney’s board of directors gathered at Walt Disney World in Florida. To give an answer to one major question; How technology was disrupting company’s traditional movie, television and theme park business, and what to do about it (Barnes, 2017)?
In August the company announced during the latest earning report it intends to remove its movie from Netflix, the market leader in streaming video service. Instead, Disney plans to launch a branded direct to consumer streaming service in 2019. For the first time in the streaming age, the world’s biggest media company had announced that enfolding a new business model was more important than sticking to its existing one (Garrahan, 2017).
You see, Disney isn’t any ordinary US film and television studio. In addition to its own library, which includes Frozen and Beaty and the Beast, Disney also owns Lucasfilm and Marvel (Barnes, 2017). Which makes the content play for a proposed Disney streaming platform one of the most potentially disruptive in recent memory. Or, in short, “Hello Netflix, welcome to the rest of us (Idato, 2017).
Moving into the ‘direct-to-consumer’ space means that Disney is planning to kick the stool out from under the traditional television business while the noose is perilously close to its neck. For traditional television players, the impact will vary, depending on the degree to which they are dependent on acquired content. Make no mistake there is still a lot of content to acquire, but there are only a handful of big players, so when they shuffle around the chessboard everyone tends to feel it (O’Brien, 2017).
Although in the last few years Netflix has increased its content offering, which is plainly pitched at an audience who might otherwise be watching cable television (Castillo, 2017). In Disney’s case, the deal will take Disney and Pixar movies, and all future content off the current right holder Netflix (Idato, 2017).
Considering customers once watched television for free or paid a monthly subscription for a package of channels, the propagation of streaming services has created a crowded competitive market.
Davey van Gilst, 386525
References:
Barnes, B. (2017, August 9). With Disney’s Move to Streaming, a New Era Begins. Retrieved from New York Times: https://www.nytimes.com/2017/08/09/business/media/with-disneys-move-to-streaming-a-new-era-begins.html?action=click&contentCollection=Media&module=RelatedCoverage®ion=Marginalia&pgtype=article
Barnes, B. K. (2017, October 8). Disney’s Big Bet on Streaming Relies on Little-Known Tech Company. Retrieved from New York Times: https://www.nytimes.com/2017/10/08/business/media/bamtech-disney-streaming.html?rref=collection%2Fsectioncollection%2Ftechnology&action=click&contentCollection=technology®ion=rank&module=package&version=highlights&contentPlacement=2&pgtype=sectionfront
Castillo, M. (2017, August 8). Disney will pull its movies from Netflix and start its own streaming services. Retrieved from CNBC: https://www.cnbc.com/2017/08/08/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.html
Garrahan, M. B. (2017, August 9). Disney takes on Netflix with streaming services. Retrieved from Financial Times: https://www.ft.com/content/2a2eac78-7c95-11e7-ab01-a13271d1ee9c?mhq5j=e6
Idato, M. (2017, August 10). Why Disney’s streaming service is the biggest disruption since Netflix. Retrieved from The Sydney Morning Herald: http://www.smh.com.au/entertainment/tv-and-radio/why-disneys-streaming-service-is-the-biggest-disruption-since-netflix-20170809-gxsyx1.html
O’Brien, C. (2017, September 8). Disney, Netflix, and the growing suckiness of the video streaming era. Retrieved from Venture Beat: https://venturebeat.com/2017/09/08/disney-netflix-and-the-growing-suckiness-of-the-video-streaming-era/
Hi Davey, this is a very interesting article. I am a huge Disneyfan and when I heard the news I got excited. Netflix only has a small portion of Disneymovies, so it would be nice to have a platform where I can watch all Disneymovies. I am curious to see how this new platform will shift the market. I will not drop my Netflix account, instead I will use both. I think a lot of people will do that too.
Kind regards,
Stephanie
Dear Davy! Thank you for this interesting blog post! I know that Disney offers a lot of movies and especially since the acquisition of Lucasfilm and Marvel. I’m just wondering here: can they increase/renew their content offering just as much and often as for instance Netflix, HBO, videoland, etc. who have even more movie providers? And the second thing I’ve been asking myself: is this streamingservice going to be that disruptive, since these kind of movies are attractive to a particular target audience? In my opinion it is not as accessible as the already existing providers.
Nice article Davey!
I have a Netflix account and I do enjoy watching the movies that are owned by Disney. I think in general what I like about Netflix is their product variety and their offerings of also lesser known movies and series. I love the fact that I can randomly pick out old movies or watch a more mainstream romantic comedy. It is the long-tail offering that attracted me and how they got so many customers.
So when I heard about Disney starting their own streaming services I was a little skeptical about how many people will actually get a subscription for Disney streaming service. It of course depends on how many movies they will offer, how much the subscription price is and how popular those offerings are. But as a medium Disney fan I would not take the effort to buy another subscription if I already have one. Also many Disney owned movies still have a contract at Netflix so they are not gonna be deleted immediately and that might slow down the transition for some Disney fans from Netflix to the Disney streaming service. I must agree with @Suzanne Beijderwellen, it might not be so disruptive as it sounds.
If all big movie producers start having their own streaming services the market will get too fragmented and those streaming services are surely not going to achieve the benefits of a long-tail strategy.
Hi Davey, thank you for this interesting blog post!
Being a Netflix fanatic myself, I was quite surprised when Disney made the announcement. Though I do not only watch Disney content on Netflix, it did make me speculate about the future of the Netflix library.
Looking at your main question: will this move by Disney actually disrupt the video streaming market? I would have to say that this depends on the way other players within the market will react to Disney’s move. It might prompt other content creators to also pull their movies and TV shows from not only Netflix but streaming competitors’ platforms such as Amazon Prime and Hulu Plus. Their offerings will subsequently be less attractive for users if content is pulled actively. Therefore, the current streaming players should focus on reducing this supplier power by producing their own content. Think of what Netflix has been doing with their Netflix Originals such as the popular 13 reasons why and Narcos. This way, streaming services increase switching costs to other platforms which will ultimately save their position within the industry.
Hey Davey, thanks for this food for thought.
I do wonder how ‘disruptive’ the new business model will be. Most news outlets have reported that the new platform will let consumers re-watch movies that they have bought as a digital file or DVD. This is different from the subscription based streaming which is done by Netflix.
While it is a logical step for Disney as they have to react to lower DVD sales, it will be interesting to see whether or not the consumer has already moved on from ownership of media to a monthly subscription.