Disney Declares War - NBCU Waves the White Flag

Disney shot a missile across the bow of the entertainment world this week when it announced that it will end its output deal with Netflix and launch at least two new streaming services of its own. The first service will center around ESPN and its extensive library of sports rights, while the second service will feature the Disney brand, including Disney Animation and Pixar. CEO Bob Iger also announced potential plans for a Marvel-based service, and possibly a fourth, Star Wars app. The initial Disney service isn't scheduled to launch until 2019, but the ramifications of the announcement are already being digested.

Disney's plan to stream is a de facto declaration of war against cable and satellite providers, which are already fighting for survival as consumer cord-cutting continues to accelerate. Faced with shrinking carriage fees (and a shrinking stock price), Disney has opted to take matters into their own hands, much like HBO did a couple of years ago when it launched HBO Now. The real question will be price point, and whether a subscription based, direct-to-consumer model can make up for the lost revenues that cable and satellite fees generate. Some analysts believe the Disney service will be priced at around $12 month, while ESPN could go as high as $25 per month. If the consumer take-rate is low, Disney will be guilty of extreme hubris, effectively biting the cable hand that feeds it, especially when it comes to ESPN.

As a potential omen of things to come, while Disney was making their announcement, NBCUniversal was shutting down Seeso, the comedy-based streaming service that focused on both NBC programming and original content. Evan Shapiro, who headed up Seeso, had already left the service, and widespread layoffs occurred throughout the summer. Illustrating the fickleness of the digital world, Seeso never caught on with consumers (especially young viewers), even at the relatively low cost of $3.99/month.

PageBreaks Take: Content providers should heed the NBC warning signs as they continue to pile a la carte services onto weary customers. When a households starts adding together all the $9.99 subscriptions that are available, the $100 cable bill starts to look a lot more appealing. There's a tipping point, and the worst outcome of all is what many millennials have already discovered - free YouTube.

#digital #entertainment