Blog 5 - The Big Guy

In this blog we will be taking a slight departure from Video-on-Demand’s relationship with cinema and looking at it as a platform. Between this blog and the next one I shall be looking at how Video-on-Demand is similar to cinema in that there are the big guys and the little guys. This will tackle the topic of Disney’s recent announcement of the launch of their own streaming service in 2019, and what this could mean for Netflix as the largest streaming service.

In August of 2018, Disney announced they would be purchasing a 42% Stake in BAMtech. They bought this stake in the company for $1.58 Billion, which will likely be made back by Avengers: Infinity War. This stake then allowed them to launch a multi-sport streaming service in conjunction with ESPN, but on top of this they plan to venture into the world of streaming film and television by 2019. Bob Iger (Disney’s CEO) said “The media landscape is increasingly defined by direct relationships between content creators and consumers” and that by launching these 2 services over the next two years Disney is going to help eliminate the connections between the creators and the consumers and just take it from one to the other. 

Bob Iger

Disney will be ending their distribution deal with Netflix beginning 2019, and instead be the ones streaming their large content, including their franchises with Marvel and Lucasfilm. Although Disney already has a massive back-catalogue of content, people may already own said content in other mediums, so on it’s own it wouldn’t necessarily be a draw. So they’re taking a leaf out of the Netflix book and venturing into original content, Disney intend to use big franchises to pull in people as Iger promises “a few ‘Star Wars’ series”, along with a new Marvel title and several new and original properties. The use of these large franchises will give them something over the other streaming services as they have already been proven to be loved, seen in box office numbers. The idea of new Star Wars and Marvel will access an existing audience.

Kylo Ren, A character from the Star Wars Universe

The first year that Disney launches their new service is going to be difficult as their deal with Netflix will be ongoing and the two services will have access to the same content. So it’s unlikely that on content alone Disney will be able to convert anyone to their new service, and the first year is going to be incredibly important in justifying it’s success. It may have some original content but the large franchise films will remain at Netflix till the end of 2019. So in an effort to combat Netflix, Iger and Disney are using the predatory pricing method. This isn’t something they’ve out and out said they’re doing but by Iger’s suggestion the service would be “substatially below” Netflix current pricing, it seems they’re purposefully trying to seem like a viable alternative to Netflix. It’s an economic strategy that will have short-term costs (which Disney can afford) but long-term rewards especially when they have sole distribution rights to their own content again. Disney’s streaming service is well on it’s way to becoming the Monopoly in streaming services that they are in Hollwood. This is at least for large franchise content. Disney will have access to Marvel, Lucasfilm and 20th Century Fox content exclusively on streaming by 2020. It wouldn’t be surprising if at some point in the next 15 years they also bought Netflix in a bid to become THE largest streaming network. 

Netflix is trying to combat this and are fully aware of what it’s going to do to them as they’re 2017 Q3 financial letter to their shareholders acknowledges Disney’s plans. The letter goes on to say they are working on in-house content more and more to try and sustain their current level of growth once Disney takes their content back. Although I’m speaking about Netflix as a small service they really aren’t, and it’s in the next blog that we’ll be tackling the real small streaming services out there, and how they might not be effected by the Disney service like Netflix will be.