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Cable feels the Force from Disney's ambitious streaming service
HE had a toe in the water. In 2015, with Netflix growing at a scorching rate, Robert Iger, Disney's chief executive, quietly tested a streaming app in Britain called DisneyLife. The next year, he started talking more openly about building a major streaming platform - a risky proposition for a company with a vast traditional TV business - and paid US$1 billion for a stake in BamTech, a little-known tech company that had helped HBO build its app.
But it was not until 2017 that Mr Iger decided to pinch his nose and step off the diving board.
For two days that June, during a board of directors retreat at the company's luxury BoardWalk Inn at Walt Disney World, Disney executives gave presentations on how digital technology was disrupting their divisions. The most alarming report came from Media Networks, a US$24 billion unit anchored by ESPN and the Disney Channel. Cord-cutting was accelerating at a much faster rate than anticipated. Live viewing for children's programming was in a free fall.
Less than two months later, Mr Iger announced a radical plan: The Walt Disney Company would shift its priority to streaming by creating ESPN Plus, a platform for sports, and Disney Plus, which would include blockbusters from the Marvel, Pixar and "Star Wars" universes, as well as decades of Disney classics.
"We were now hastening the disruption of our own business," Mr Iger wrote of the move in his recently published memoir, The Ride of a Lifetime. The chapter title: "If You Don't Innovate, You Die."
Disney Plus arrives on Tuesday, every trumpet in the Magic Kingdom blowing on its behalf. Streaming has been on the rise for a decade, and last year, for the first time, the number of streaming subscribers around the world (613 million) surpassed the number of cable subscribers (556 million), according to the Motion Picture Association of America. But the debut of Disney Plus, with its treasure trove of franchises and US$7 monthly fee, is the industry's equivalent of Thor slamming down his magic hammer: a quake that changes everything.
To defend its turf, Netflix is spending billions to produce Disney-style family entertainment. WarnerMedia, owned by AT&T, copied the Disney playbook last month when it staged an elaborate presentation to disclose details about its own online video service, HBO Max, set to arrive in May at US$15 a month. Comcast, the owner of NBCUniversal, with 21 million cable customers in the US, had been hanging back. But five months after Disney unveiled Disney Plus, Comcast announced that next April it would roll out Peacock, a streaming service with 15,000 hours of programming.
Out: buying a costly bundle of channels, most of which you don't watch, and dealing with the hassle of a technician coming to your house when it goes awry. In: cheap, easy-to-activate, easy-to-cancel, digitally delivered entertainment on demand.
Without question, analysts said, the flood of new streaming services will cause more people to cancel traditional cable and satellite hookups. By 2009, about 10 million adults in the US had dropped their pay-TV subscriptions, according to research firm eMarketer. By the end of this year, that number is projected to be 46 million, according to eMarketer estimates. Put another way, one in five adults in the US will have cut the cord by 2020.
Cable television remains a colossal business. Even in decline, Disney's cable portfolio generated US$1.3 billion in profit in the most recent quarter. NBCUniversal had US$959 million. Cable executives are not raising a white flag. "I think there is actually a long, very robust future for cable as well," said Frances Berwick, an NBCUniversal president who oversees Bravo, E! and Oxygen. "These businesses will coexist. It's not like one is going to go away and everything goes into the other."
Yet look at how fast streaming services have expanded. Netflix, which started serving up movies and shows online 12 years ago, has grown into a giant, with 158 million subscribers worldwide. Amazon Prime Video is available to 100 million Amazon Prime members. Hulu has 28.5 million. Analysts expect Disney Plus to have at least eight million customers by the time it is seven weeks old and 76 million at the end of five years.
Nearly US$200 billion worth of media mergers came about in the past 18 months, all driven by the transition. AT&T spent US$85.4 billion for what is now WarnerMedia so that it could create HBO Max. In August, Viacom and CBS announced a plan to merge to make it easier to sell their entertainment wares to the new players while adding bulk to their CBS All Access, Pluto TV and Showtime streaming services.
Cable providers point out that Hollywood companies face a steep learning curve. Companies will have to learn how to deal directly with viewers the way cable companies have for decades - not an easy proposition, noted Pat Esser, president of Cox Communications, the nation's third-largest cable carrier.
"They're about to enter a space where the consumer, with a click of a button, will decide to be your customer or not to be your customer," he said. NYTIMES