Wow this is happening faster than I thought it could. Disney is already closing down linear Disney channels. No US customers need not worry for the moment. But in Europe, Disney has begun a transition that marks a very important moment in the history of TV distribution. After failing to come up with a distribution agreement with SKY TV Disney dropped their kids channels from the distributor. The channels include Disney Channel, Disney XD and Disney Junior. They will remain through the end of September. This isn’t the normal type of stand off that usually hits the cable world. In fact Disney has no plans to pull other properties like Fox or Nat Geo. “From October 1st, Disney+ will become the exclusive home for content from Disney Channel, DisneyXD and Disney Junior in the UK,” said a Disney spokesmen on the matter. Walt Disney Company remains committed to our kids channels business,” and that the company plans to “execute distribution agreements for Disney channels in many markets where Disney+ is also available.”
The company still wants linear TV channels but has decided to take its Disney branded content off of linear TV.
Disney is a long way from making this the model across the world or in the US, but it might not be a far off as you might expect. If you recall, the Disney Channel was once every bit the premium option as HBO. It didn’t live up to that label, which is probably why it eventually became a basic cable channel, but there was a time when ole Nancy would pop on to the TV during free previews and encourage people to bring the Disney Channel into your homes for a monthly fee.
The groundwork for something revolutionary was laid when the company launched ESPN+. The offering which costs $5.00 a month is hardly a substitute for ESPN and more of a supplement. But it is a way to get people to wrap their mind around delivering ESPN through an app. Nobody would say I don’t need ESPN bc I have ESPN+. But what it does is let Disney work on things like delivering live sports via streaming. It also allows it to build a distribution network for the concept. Keep in mind, Dish launched an international product called Dish World years before it launched Sling TV. This was sort of a practice run for the first cable replacement service.
Let’s take a look at what Disney has already done. Upon launching Disney+ it offered its own branded bundle of Disney+, Hulu and ESPN+. ESPN+ of course is delivered via the same app the pay TV customers use to watch all of the rest of ESPN’s channels online. If Disney were to say introduce a way to pay say $5.00 more to get that bundle along with ESPN how many people would take them up on it? I think a lot. For less then $20.00 you could get the entire ESPN suite of channels, Disney+ with its expansive collection of tittles and new series, Hulu with its expansive on-demand catalogue and shows less then 24-hours after they air. That is a substantial package right there.
Disney of course also offers its own total cable replacement service with live TV through Hulu. Again this is a point Disney has not pushed too hard yet. While there are millions of people streaming content with set-top solutions and smart TV apps the public is not yet ready to walk away from the familiarity of cable. But as the Internet delivery landscape changes with ATSC 3.0 and 5G internet on the way the new delivery models could change the way people approach it all.
Disney is already getting more aggressive in how it offers its currents services. Recently the company stopped offering one week trials of Disney+. And while some have connected that change with the coming Hamilton debut Disney may have just decided that it won’t play along with the same game that CBS All Access does. That game being that people will wait until a show has finished a run, get a free preview, binge it, then cancel. If you want to see Hamilton or The Mandelorian, it’s going to cost you about $6.00. And Disney is betting people will pay for it. My guess is that they are seeing a very low churn rate from people who have signed up so far since launch.
So here is my big prediction as to how this will all roll out. Over the next few years there will be a basic high speed internet tier rolled out across the country that takes advantage of new technology to build a level of free or at least low cost Internet access to everyone in America. At the same time you will also see the use of Internet connected TV’s and set-top boxes grow. Disney will see a steady rise in its customer base for Disney+, Hulu and ESPN+. And then it will hit a snag with a major provider like Comcast or Spectrum. And it will say ok, if you don’t want to pay us for our content we are going to pull it all and expand ESPN access through our apps. And that will be the beginning of the end of the current model. Because not only will Disney be in position to offer all of its content through its own portal, it could encourage subscribers to drop their cable package and replace it with Hulu’s live TV.
The TV industry better be very afraid.