Dis­ney’s Magic King­dom con­jures movies and sports stream­ing ser­vice

China Daily (Hong Kong) - - Q & A WITH CEO -

NEW YORK — With new stream­ing ser­vices in the works, Walt Dis­ney Co is try­ing to set it­self up for a fu­ture that is so far largely been framed by Net­flix.

Quite sim­ply, that means “stuff I want to watch when I want it”.

The Magic King­dom is launch­ing its own stream­ing ser­vice for its cen­tral Dis­ney and Pixar brands and an­other for live sports. This will al­low it to by­pass the ca­ble com­pa­nies it re­lies on — and Net­flix — to charge con­sumers di­rectly for ac­cess to its pop­u­lar movies and sport­ing events.

“They’re bring­ing the fu­ture for­ward. What they talked about were things that looked in­evitable, at some point,” said Brian Weiser, an an­a­lyst at Piv­otal Re­search.

What is less clear is if Dis­ney will be able to make big bucks from it.

This is im­por­tant as the de­cline in ca­ble house­holds and the shift to smaller, cheaper bun­dles pres­sures the prof­itabil­ity of Dis­ney’s ca­ble net­works. Fewer sub­scribers and fewer view­ers mean less money.

In the nine months through to July 1, ca­ble net­works’ op­er­at­ing in­come fell 13 per­cent from the year be­fore to $4.12 bil­lion.

Start­ing in 2019, the only sub­scrip­tion stream­ing ser­vice with new animated and live-ac­tion Dis­ney and Pixar movies will be the Magic King­dom’s own app. That will in­clude Toy Story 4 and the se­quel to the huge hit Frozen.

Older movies will be there too, as well as shows from the Dis­ney Chan­nel, Dis­ney Ju­nior and Dis­ney XD, and orig­i­nal tele­vi­sion and films. That could be hugely at­trac­tive for fam­i­lies with young chil­dren in the United States.

Dis­ney is end­ing an ex­clu­sive ear­lier movie deal with Net­flix and the stream­ing gi­ant’s shares have suf­fered. Net­flix has grown into an en­ter­tain­ment jug­ger­naut in its own right as it fo­cuses more on its own ex­clu­sive pro­gram­ming.

Net­flix al­ready seemed to be brac­ing for the po­ten­tial loss of the Dis­ney movie rights ear­lier this week when it an­nounced its first-ever ac­qui­si­tion — the pur­chase of Mil­lar­world.

This is a comic book pub- lish­ing com­pany that will de­velop films and kids shows based on its port­fo­lio of car­toon char­ac­ters.

Dis­ney might bring more of its prop­er­ties — par­tic­u­larly its Mar­vel su­per­heroes and the Star Wars fran­chise — un­der its wing, and could even of­fer them as sep­a­rate stream­ing ser­vices.

Robert Iger, the CEO at Dis­ney, is con­sid­er­ing whether the en­ter­tain­ment gi­ant should con­tinue li­cens­ing Mar­vel and Star Wars movies to out­side ser­vices such as Net­flix or move them into the Dis­ney app.

Still, this new ser­vice will be avail­able in “mul­ti­ple mar­kets” out­side the US as well, tak­ing ad­van­tage of the com­pany’s global ap­peal.

As for its sports ven­ture, Dis­ney had al­ready de­cided it would launch a stream­ing ESPN ser­vice, even though it is not meant to com­pete with the com­pany’s TV chan­nels.

The sports ser­vice will be rolled out in early 2018, a lit­tle later than pre­vi­ously an­nounced, and will air base­ball, hockey and soc­cer games, ten­nis matches and col­lege sports through ESPN’s pop­u­lar mo­bile app.

Yet ESPN will not be stream­ing pro foot­ball or bas­ket­ball, at least ini­tially.

Cus­tomers will also be able to buy fuller stream­ing pack­ages from the base­ball, hockey and soc­cer leagues, and watch them on the ESPN app.

“Ul­ti­mately, we en­vi­sion this will be­come a dy­namic sports mar­ket­place that will grow and be in­creas­ingly cus­tom­iz­a­ble, al­low­ing sports fans to pick and choose con­tent that re­flects their per­sonal in­ter­ests,” CEO Iger said on a con­fer­ence call with an­a­lysts.

Dis­ney, though, will have to be care­ful that it does not trans­fer too much sports pro­gram­ming from its TV chan­nels to the app. Get­ting the bal­ance wrong could up­set ca­ble com­pa­nies and weigh on the price they pay for ESPN.

To roll out its stream­ing ser­vices, Dis­ney is tak­ing ma­jor­ity con­trol of BAMTech, the stream­ing arm of Ma­jor League Base­ball, for $1.6 bil­lion. It now owns 75 per­cent of the com­pany.

The ac­qui­si­tion and the new ser­vices will be “an en­tirely new growth strat­egy” for Dis­ney, Iger pointed out.

The new stream­ing ser­vices will likely “ac­cel­er­ate the ero­sion” of the com­pany’s tele­vi­sion net­works, es­pe­cially if other ma­jor ca­ble firms make sim­i­lar moves, Moody’s an­a­lyst Neil Be­g­ley stressed.

But Iger has ar­gued that BAMTech gives Dis­ney “op­tion­al­ity” if the ca­ble ecosys­tem changes fur­ther. “If there is greater “ero­sion” — say, if more peo­ple drop ca­ble bun­dles or choose cheaper bun­dles with­out key Dis­ney chan­nels — the com­pany has more ways to get its en­ter­tain­ment di­rectly to cus­tomers,” Iger said.

He also con­firmed there are no plans to sell the Dis­ney or ESPN TV chan­nels di­rectly to cus­tomers on the apps.

But hav­ing a di­rect re­la­tion­ship with cus­tomers tells Dis­ney ex­actly what they are watch­ing, giv­ing it pow­er­ful tools and in­for­ma­tion that could help feed de­ci­sion-mak­ing and, on the sports side, sell ad­ver­tis­ing.

Ul­ti­mately, we en­vi­sion this will be­come a dy­namic sports mar­ket­place that will grow and be in­creas­ingly cus­tom­iz­a­ble.”

Robert Iger, CEO of Walt Dis­ney Co.

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