Disney’s digital distribution strategy
As Millennials increasingly prefer to watch content online, media companies such as The Walt Disney Company (DIS) are increasingly looking at distributing content digitally. On April 24, 2017, Broadcasting & Cable reported that Disney’s ABC Television Group had signed up around 160 affiliate stations for Clearinghouse. Clearinghouse is Disney’s initiative to make its network and affiliates available for OTT (over-the-top) distribution on its ABC app (application) and other streaming services such as AT&T’s (T) DirecTV Now and Google’s (GOOG) YouTube TV.
Disney said in its fiscal 1Q17 earnings call that it doesn’t believe it needs to do acquisitions to extend its digital distribution strategy. It added that with respect to its content licensing deal for ESPN with over-the-top services, Disney has ensured that ESPN is “in all subs or all households launched.”
According to Disney, it would bode well for ESPN if skinny bundles priced at $40–$50 per month became more popular. That could mean consumers could opt for Disney’s video services in the future.
In August 2016, Disney acquired a minority stake of 33.0% in BamTech, a video streaming company formed by the MLB (Major League Baseball). Disney plans to launch a direct-to-consumer service for ESPN through its investment in BamTech.
Why the rise in streaming services?
According to a TiVo report on subscriber trends for 4Q16 and as you can see in the above graph, 52.8% of users subscribe to Netflix, while 26.3% subscribe to Amazon (AMZN) Prime Video. These services are followed by Hulu and Time Warner’s (TWX) HBO Now, which account for about 11.8% and 5.0% of user subscriptions, respectively.
As Millennials increasingly move toward viewing more content online, companies such as YouTube are trying to grab market share. Millennials and other consumers are finding that they can save money by viewing content online rather than footing a cable bill that can range from $100–$150 per month.