Disney + Fox: Bigger Than The Media Is Suggesting
Here is the cocktail napkin math: Netflix – $9 billion a year. DirecTV & Comcast cable alone – $90 billion a year.
So… who do you think Disney is going after with this merger? That’s a rhetorical question, because only blinders big enough for the Trojan Horse could lead to the “they are going after Netflix” angle.
Streaming is not a business. It is a delivery system. It is a delivery system that allows a new paradigm. All hail Netflix, the first to go there seriously.
But what Disney needs to make this merger a success is to get you and me and at least 75 million domestic households to sign up for three or four “Netflixes” under their massive umbrella of content. $30 to $40 a month.
And in order to get more than 10 million people to do that, they need more consumers to cut or significantly shave the cord. The fight is with AT&T/DirecTV and Comcast, trying to take money out of their pockets… you know, where the money is.
I am a little horrified by Disney eating Fox, including a movie studio that will, in a few years, cease to exist as more than a brand. That’s not good for consumers.
However, I have to applaud Disney for not ostriching, like most of the majors, and instead taking on the reality of the future, right now. Original content will continue to have value, but Dinsey sees that – aside from sports – the long tail is killing the long-term value of individual bits of content. There will be more revenue produced by more content for, virtually, ever… but the big bites of revenue will come early and not later (this includes theatrical, which will become more important moving forward).
There can’t be fifty $10 a month streaming subscription businesses with more than 10 million subs. It can’t work.
There can’t be five $10 a month streaming subscription businesses with more than 10 million subs… not so long as cable/satellite remains in 90 million domestic households.
Disney needs your $30 a month. That is where they are heading. And the only way to get there is to get the average cable or satellite bundle (and it’s ALL bundling… Netflix is a bundle… wake up, semantic BSers!) to $60 a month.
Both Comcast and AT&T need to angle toward that eventuality being as profitable as their current configurations. And they can. They could start by removing ESPN and the $6 a month they are paying per customer from your bill (although it will be a while before that happens).
That is where we are heading now, thanks to Disney. AT&T/DirecTV will be the home of HBO, all Time-Warner content, the massive Warner Bros library of TV and film and more. Don’t be surprised if they, eventually, buy the Fox broadcast network. Comcast will be the home of NBC-TV, Universal film and TV product and more. Disney will be ABC, ESPN, etc.
There is room for ONE more major player. One. Netflix can keep rolling along with $10 a month. Or the company will be acquired by Amazon or Apple and become the fourth major across-the-board $30 a month entertainment monolith, starting with a 50 million domestic subscriber advantage.
Who will buy all of Viacom, including the CBS TV network? Who will buy the Fox broadcast network? These businesses will be extremely valuable for another 10 – 15 years before becoming nothing but brands (the definition of which will include the idea of weekly episodics).
Not to put too fine a point on it, but this is not a revolution. It’s not disruption. It’s a re-consolidation, finally nodding to the change that streaming delivery of content demands.
This seems to be driven by content concerns that only Disney TV and Movie product would not be enough to compete with Cable and the other streamers. Fox gives them another 2 thousand movies and decades of television, certainly enough catalogue to support a streaming network. If they don’t reup with HBO and have the new OTT as Fox’s Pay cable window, they can probably get away with charging just as much as HBOGO goes for if not more by including their television properties.
My biggest concern may not come to pass, they are buying Fox so they have R rated films and rougher blockbusters and Searchlight product. Shutting that down or diluting it would defeat the whole reason for the purchase. It just worries me that they became uninterested in Touchstone, DreamWorks and Miramax (these last two after a very short time of ownership) and would hate to see the same happen at Fox.
My greatest hope is that they truly exploit the fox film library. If I am paying for a streaming channel I want everything, maybe not at one time, but I need the opportunity to see Forever Amber or The Blue Max or even the Mr. Moto films every so often. That FXM channel seems to do a decent job making the deep cuts available but that is only with a massive cable subscription. Streaming was the promise of more content and instead it seems to be shrinking.
Anyway, losers in all this seem to be….
Blue Sky, Goodbye prime release slots you are now an October and February company
HBO, Can’t imagine Fox stays with them. Having WB and Uni films (and their series) will still give them plenty of product, but having Disney and Fox at the same home is very different than competing against the trickle of product that Netflix, Showtime and Starz have.
Theater owners, Hey those guys that forced you into giving them 65% of the gate this weekend…they are now in control of a full one third of the product that comes your way.
Netflix, you are now a tv network, all the new studio product is spoken for and a large chunk of the television library is likely leaving as well.
But I guess the good news is I would expect another Simpsons film to be here by 2019?
Looking forward to more milquetoast corporately approved product that gets 95% on RT flooding the marketplace. And they wonder why movie theaters are dying….
PJ, that is indeed a fucking problem.
Here’s where Dave loses me: Why would Disney give a fuck about AT&T, or COMCAST? Those are broadband companies. They provide more services, than fucking entertainment. Disney, wants that Netflix money, because that Netflix money is more fucking consistent. Unless Disney merges with Verizon… god help us all. Disney, wants something else. They want to be something more. They want to be the destination place for content on the internet. That took its first step today.
He is saying that Netflix is now at the kids table and this puts Disney in the bigger leagues against AT&T and Comcast. Netflix money wouldn’t sustain what they are trying to achieve.
All seeking critical mass on enough content to shuuuuuuup through those pipelines.
DP isn’t saying that Disney wants to be AT&T or Comcast. He’s just saying that Disney wants to have customers who shell out monthly for their product at a higher rate comparable to what they do for those service providers.
die hard ride at disneyland. yippy kay yay.
Hcat and palm, and that’s a faulty point. Based solely on the fact, that AT&T and Comcast are telecoms. Disney, is not going to make 90 billion like those companies. Unless it buys Verizon, because fuck it. WHY NOT?
The point remains, that Netflix is monumentally important, and they are the adult table. They are a service, that everyone needs. If you are into serious and well made content. Netflix, is where HBO was 14 years ago. That’s why movies coming and going from Netflix, are some of the better click bait articles at the end of each month.
Disney, wants to be that destination, and they want all of that god damn fucking money. They want everyone to be obsessed with what they are doing, like we aren’t all fucking ready, but they even want more headspace. YAY!
Netflix has 108 million customer. How many does Disney want? I’d wager, world wide? 500m. Ponder the amount of money they get from that many customers, and realize, that’s a good chunk of god damn change. That’s sustainable change, that goes into the pot with everything else.
I don’t think we are far off in the points we are making JS. I am sure the 500m target is surely something they are wishing for, and to get to that they will be poaching customers from Netflix and Cable.
When Disney’s OTT premieres I fully expect Netflix to take a sizeable hit. Netflix indeed saw the future and planned accordingly by making original content but without a major studio contracted to deliver their fresh hits within a year of theatrical, plus the loss of the bingable television titles Fox and Disney now provide them, Netflix is going to start looking more like Showtime on Steroids than the ‘hey who needs cable I have all I could ever possibly need right here’ alternative it once was. I dropped cable years ago because there was enough content on Netflix to keep the whole family happy. When it comes down to choosing where my dollars go, Cable vs. Netflix vs. Prime vs. Disney vs. HBO vs. eventual Discovery Bundle I can’t imagine we will have more than two of those, and Netflix will fall lower on the list since their main driver will be their original content which I can mostly do without.
I expect Cable to eventually drop to about 50% of households in the next decade and people will be making the same decisions of which subscriptions best suit them. With Fox the Disney OTT will likely cast the widest net.