Disney knows its future is streaming. Even before Thursday's tectonic deal to buy large swaths of 21st Century Fox for $52.4 billion, Disney was already laying the groundwork to move into online entertainment in a big way. It has its own streaming services for sports and for television and film on their way next year and in 2019.
After the Fox takeover is complete, Disney will have unprecedented dominion over the movies and TV you love to watch today, from "This is Us" to "The Simpsons." Pixar will share a neighborhood with the Simpsons. The classic Star Wars films can sit on the same shelf as the new ones now, and Disney has assembled every Marvel character except Spider-man.
But that doesn't mean CEO Bob Iger, who agreed to stay on board and run the Disney empire through 2021, will call digital video's shots.
Netflix? It isn't going down anytime soon. Also not going down: prices for virtual live-television services like SlingTV, unfortunately. Watch for them to creep higher as an empowered Disney can extract higher fees. The biggest question mark hangs over Hulu, the streaming service that's about to fall squarely under Disney's control. Its possible fates run the gamut, without much of a road map for what path it will take.
Overall, your streaming options will be part of a bigger smorgasbord, and you'll likely pay more to really chow down.
A Netflix killer?
Leaks last month that Disney and Fox were discussing a deal immediately fired up speculation about a so-called Netflix killer. The fabled, monster streaming service would be so packed with top content it could threaten the world's subscription-streaming king.
There's plenty for Netflix to be nervous about from the combined Disney and Fox, but the realities of the streaming landscape mean Disney isn't likely to shoot the silver bullet.
For one, Disney's chief executive said he's not keen on the idea of building one service to rule them all.
In his initial comments after the agreement was announced, Iger said his preference is to let consumers be "choosy" about how they stream from Disney's widened universe to their gadgets.
Disney already has plans to launch an ESPN-based sports streaming service next year, at an unknown price. The following year should bring afor the company's own movies and shows -- basically, a mini Netflix a la Mickey Mouse.
Iger has said the service will pack a cost "substantially below" that of Netflix, which charges $12 a month for its standard plan. Disney's newest films will be going to this new service instead of Netflix at that point too, since Iger plans to let a distribution pact with Netflix lapse. That means it'll be the place to stream the live-action "The Lion King" with Beyoncé, "Toy Story 4" and "Star Wars: Episode IX." It will also include new television series Disney is developing, based on Star Wars, "Monsters Inc.," "High School Musical" and Marvel characters.
Add Hulu, which starts at $8 a month, to that list, and Disney will control three distinct streaming services in the coming years.
But Iger indicated the company isn't interested in rolling them together into one go-to streamer. Instead, he wants consumers to pick and choose which Disney subscriptions are right for them. If you'd like to subscribe to them all, great. But you aren't likely to get all those parts in one place for a single low price.
Of course, Netflix and other companies increasingly betting on streaming video, like Amazon, Apple and Facebook, have reason to be wary. They'll still face new competitor with a library on steroids.
A streaming service's library is one of the biggest drivers of its success, analysts at Barclays said in a note ahead of the Disney-Fox deal, and the catalog on the Disney-branded service could have more for you to watch than even Netflix.
Disney's kids' content library, in one example, comprises about 700 titles, ranging from Mickey Mouse movies to the computer-generated Pixar animations of today. That compares with Netflix's roughly 400, which includes Dreamworks titles like "Trolls" and "The Boss Baby" as well as originals like "Lemony Snicket's A Series of Unfortunate Events." But about one-fifth of Netflix's kids' content comes from (of course) Disney, like "Moana" and "Zootopia." So the actual library gap between Netflix and Disney is wider.
"The quality of the offering would be arguably better than any other service," Barclays analysts said. The Fox deal brings three of the biggest films in history -- "Star Wars," "Avatar," and "Titanic" -- under one umbrella, and Fox's FX channel has some of the most acclaimed shows on television, like "The Americans" and "Atlanta."
Barclays points out that in the last five years, the only other cable network that's won more Emmy awards than FX is HBO.
But even a Disney-branded service -- the one that most resembles Netflix -- isn't likely to unlock the company's entire vault of video at first. The pricing on the Disney-branded service is planned to be "substantially below" than that of Netflix because it will begin with "substantially less volume," Iger said last month.
That's because some of Fox's high-profile, upcoming titles --like a sequel to 2016's blockbuster "Deadpool" and "Avatar" sequels two through five -- are promised to other distributors before Disney can stream them itself. Many movies being created by Fox's studio are committed to HBO until 2023. HBO owns and operates its own apps to compete in streaming, HBO Now and HBO Go.
So for at least six years, you'll need to keep cobbling together your own bespoke mix of streaming video subscriptions to watch it all.
That mishmash of memberships could become pricier, because Disney's giant acquisition could force virtual-cable services to raise prices.
Over the last three years, SlingTV, Playstation Vue, DirecTV Now, YouTube TV and Hulu have all welcomed cord-cutting consumers with their cheaper, skinnier bundles of live channels -- the cheapest plans start at $20, compared to the $100-plus price for the average cable bill. But Disney's consolidation of so many networks in one place gives the company an incentive to rebundle all its channels in a take-it-or-leave-it clump.
Sling currently offers Disney in one of its $20 monthly packages and Fox in a separate $25 package, for example. But, BTIG analyst Rich Greenfield asked, in a note this week ahead of Disney's announcement, "will Disney allow either of these partial carriage deals to persist?" If not, that could mean theat these services will begin to get fatter -- and more costly -- if Disney insists virtual-cable companies carry the full suite of its channels if they want to carry any of them.
For all the channels they carry, virtual cable services must pay carriage fees to programmers like Disney. At the very least, Disney's increased leverage could mean it demands higher fees from the virtual TV services, Greenfield said. None of those businesses enjoys a big cushion between its costs and its sales to absorb higher fees. If they must pass the cost onto you, your virtual cable subscription could see a bump.
Et tu, Hulu?
Hulu has always been run by a group of frenemies, three TV programming giants -- Disney, Fox and Comcast, with each holding a 30 percent stake, and the remaining 10 percent in Time Warner's hands -- which compete for eyeballs on traditional TV but need to work together for Hulu to function.
Disney taking control only makes Hulu's future muddier. Hulu doesn't disclose its subscriber numbers, but estimates range from 14 million to 16 million people have memberships, dwarfed by Netflix's 109 million.
Currently, Hulu is controlled by Disney and Fox separately. After the deal, Hulu will be controlled by... Disney and Fox combined. But that doesn't mean you can bet on Hulu's direction following the same course it already has. Disney/Fox remains in the driver seat, but for the first time in six years, Comcast can start shouting directions to take.
Up until now, Comcast has been a silent partner. In order to win regulatory approval of its NBCUniversal takeover, it agreed to sacrifice control over Hulu's direction. Whenever Fox and Disney decided what shows to stream on Hulu, Comcast was required to contribute a similar package of its own shows under the same terms.
But those restrictions and Comcast's muzzle come off in September. Before Disney can finish acquiring Fox, Comcast will start to have a say in how Hulu looks and fees. And because we haven't see what Hulu looks like with Comcast as a vocal partner, it's hard to gauge what it will look like after Disney controls most of Fox and most of Hulu.
Iger on Thursday sketched a faint picture of how Hulu may change. He anticipates that more adult-oriented content from the merged Disney/Fox will flow into Hulu (along the lines of R-rated "Deadpool" and edgy FX programs like "American Horror Story" and "Fargo"). The family fare of Marvel, Pixar and Disney proper would be funneled to the company's new service launching in 2019.
Will you still be able to watch Fox, FX, ABC and Disney shows there? Probably, unless Disney decides to abandon ship and move the programs it makes to its wholly owned services instead. Will Hulu still have NBC shows like "The Tonight Show" and the "Will & Grace" reboot? Probably, unless Comcast, rankled by losing an equal seat at the table so soon after it's allowed to have a say, bails instead.
How will that actually play out? For now, all we can say is stay tuned.
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