We’re at a real tipping point in the industry. Yes, cable seems to be something that will inevitably be phased out over the course of the next several years, but as it slowly diminishes in growth and profits, the big companies who have a stake in it will start to feel that drop, even as they profit from the streaming side of things. Disney is no different in that regard.
As you have likely heard, they plan on releasing a mondo bundle deal that will include Disney+, Hulu, and ESPN+ for $12.99 a month. Obviously, it’s a pretty slick deal, one that will make believers out of many critics of streaming. But this could very well end up “hurting” Disney as well as help it, THR reports.
According to the outlet, this deal will likely negatively affect Disney’s standing with cable and satellite bundlers. With them offering so much to streaming customers, how will this affect their negotiations? This is especially bad because their Media Networks division — which consists of ABC, Disney Channel, and ESPN among others — are so important to their bottom line.
“The rollout will affect pay TV negotiations. How could it not?” analyst Jimmy Schaeffler of the Carmel Group told the outlet. “Nothing will be negotiated without the cloud of Disney+ hanging over meeting rooms.”
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“The perverse outcome is that these competing services and bundles will encourage more cord-cutting,” said Michael Pachter of Wedbush. “Fewer cable subscribers means lower retransmission rates.”
In short, it would that Disney could be shooting itself in the foot, with it stunting its own growth for its Media Networks division, which is forecast only to grow 14 percent over the next five years. Its own streaming service seems as though it will be taking its own toll.
However, on the flip side of things, that’s just short-term loss — and a loss that could be almost directly filled with its smallest division, Direct-to-Consumer (aka streaming). This is expected to grow to $29.3 billion over the next five years, practically matching Media Networks in size.
In short, this looks to me like an expected short-term loss that would happen regardless of what Disney did. If they clung onto their Media Networks approach, it would only die slower, and Disney would be left out to dry. But this doesn’t keep this move from being a risk.
“Will Disney+, ESPN+ and Hulu hurt Netflix and its ilk? Yes, it will — significantly,” Schaeffler said. “The folks at Netflix, and their shareholders, should be very worried. Their lives are about to change.”
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