
Disney’s Choice - darwhy
https://stratechery.com/2017/disneys-choice/
======
zanny
I wonder if assumptions about horizontal vs vertical content hold. Disney put
the first episodes of their Ducktales reboot on youtube, and a week later it
has... 1.6m views. On youtube? That doesn't pay _one_ hobbyist minimum wage
for the month much less a best in class animation studio.

On one hand, yeah, its targeted at kids. They probably aren't savvy at online
content discovery. They almost certainly aren't subscribed to the Disney XD
Youtube channel when there are Spiderman vs Pregnant Elsa videos to watch.

On the other hand, they put it out for free, to anyone in the US with an
Internet connection, and they got 1.6m hits.

I don't think horizontal works as a business strategy. It relies entirely on
memetic effects to propagate your content because the advertising budget
required to reach an entire demographic to get ubiquity is magnitudes larger
than the cost of actually making the thing. There is too much content
inundating people - _especially children_. It makes your success completely
random. Did your "meme" scenes go viral? Did your intricately designed
quotable character take off? Did you have those, and just get overshadowed by
some other meme at the time?

We won't see the consequences for a while. It will be 10 years before the
cablecutters who dropped Disney have children at a critical enough mass to
dramatically limit the number of young faces in front of non-interactive
screens. But when that comes, it will have consequences none of these
companies traditionally built on tv viewership are ready for. And I don't even
know if they can prepare.

I feel like the only real end-game solution is to cultivate a fanbase, and use
them as your revenue stream - much like how music has become today. Artists
don't make anything off trying to sell their music anymore, because not being
on spotify and pandora is a death sentence to your relevance. You need the
audience, even if they aren't paying you anything, to attract fans that want
mech you can profit from.

It would be really weird to see Ducktales as a Patreon project that is getting
paid by 100k supporters several millions a month, but it seems to me that is
the endgame for original creative media in the long run.

~~~
pgodzin
I doubt they put up Ducktales content on Youtube expecting hundreds of
millions of view and a ton of advertising money. It's more to have the IP
consumed and fresh in kids' and parents' minds for when a new Ducktales movie
or toy comes out to support the reboot. The reboot is more of an ad for future
monetizable products than anything else.

~~~
ghaff
Which is one of the reasons to make free or essentially free content available
these days. The flipside is that, when there are free or essentially free
distribution channels, there's a lot to be said for making some content freely
available rather than making an inconsequential amount of money off it, if
it's tied to other things you can monetize more effectively.

~~~
ctdonath
That may explain why Disney put so much high-value content on Netflix recently
... and then announced they're going to yank it all to a new & devoted
streaming service. Bait viewers to the near-free content, then tell them "it
moved over there" where it can be far better monetized.

------
dforrestwilson
It's not entirely binary and I think Ben underestimates the power that content
creators have in this country. Some content is simply classic, and will have
value 30 years from now. Disney is amazing at making it. Disney is also
amazing at lobbying Congress, along with other traditional media content
providers to entrench their copyrights beyond the pale:
[https://www.theverge.com/2017/4/3/15161522/mpaa-riaa-
copyrig...](https://www.theverge.com/2017/4/3/15161522/mpaa-riaa-copyright-
office-library-of-congress-dmca-infringement)

Netflix has been _forced_ to create it's own content because old media wants
to charge Reed an arm and a leg for anything distributed online that they
don't have control over. Old media always raises the asking price for anyone
who comes to them requesting to redistribute content. They are scared to
alienate the cable providers, the advertisers, and of losing even more control
of distribution with these new consumer-centric on-demand business models.
This is why despite years of hype, Google and Apple haven't gotten far with
their TV bundles so far.

I do think the Netflix - Disney love/hate is over-hyped. Both can exist.
Disney can keep crafting great stories and Netflix can keep targeting customer
groups across the globe with affordable content that scratches their niche
itch. Amazon has been more willing to pay the piper, but has also had to
resort to in-house content. The great thing about good TV/movie content is it
tends to retain value. Good luck to Disney creating as seamless a distribution
platform as Netflix though...

I think Viacom is going to be the real loser here, to YouTube and Netflix.
Most of their MTV, Comedy Central stuff has no replay value. Music videos in
particular have been completely absorbed by YouTube. Meanwhile Netflix is
doing great comedy specials. Years of family in-fighting has only further
weakened Viacom's position and they are likely to be forced into tiered
packaging deals by even their traditional cable and satellite partners.

------
garduque
I have a 2- and 3-year-old. Give me all the Disney things at $10/mo and we're
good. I'd prefer they be included in Netflix, but Netflix+Disney and I'm still
better off than cable, and hopefully there is some better curated content as a
result.

~~~
rdtsc
One thing I noticed with my kid (5 yrs old) is they enjoy repeatedly watching
the same show. Even if the whole Disney catalog was available they'd probably
watch the same move for days on end. At first I was encouraging trying new
shows but apparently it is normal for kids to act that way. So what we ended
up doing was just purchasing the movies. The trick is figure out if they'd
like it. But so far we've had a good track record at guessing.

$10/month would be worth it for me but it's probably not realistic. A single
movie usually costs more than that. With this plan they'd cannibalize their
own media market.

~~~
Iv
> $10/month would be worth it for me but it's probably not realistic. A single
> movie usually costs more than that. With this plan they'd cannibalize their
> own media market.

Another way of being 'realistic' (not moral) is to see that 1TB hard drive is
100 bucks and can contain a thousands of Disney movies, which can be obtained
fairly easily online.

They can't charge too much for something that people essentially buy out of
good will rather than necessity.

------
TazeTSchnitzel
There's a risk that Disney will screw this up, but personally it looks like
something hard to get wrong. Disney has a huge library of unique, high-quality
content people really want to watch. If they can put all of it — not
artificially limiting the selection too much — on one service and set the
price right, they should do well.

~~~
heartbreak
They bought their minority stake in BAMTech (the streaming spinoff of MLBAM)
earlier this year. There’s no way they’re going to mess this up from a tech
standpoint either.

~~~
stevenwoo
HBO Go was totally redone from the ground up by the MLB team I believe and
there were some hickups at the start but it has been pretty good since then.

~~~
jwoah12
Minor correction - HBO Go is still in-house at HBO. BAM runs HBO Now, the OTT
service.

Source: I work at BAMTech.

------
chi17
Splitting from Netflix would've been genius if the idea were that they'd
partner with a competitor to challenge Netflix, namely someone like Hulu or,
better yet, Amazon.

Going off on their own without being part of a larger more diverse set of
content could deal a serious blow to Disney. I for one would not ever pay
Disney through a Disney-specific service just for streaming Disney content, as
much as I like Disney movies.

~~~
pgodzin
What's the difference at that point if Disney's content is on Amazon rather
than Netflix. They are betting that their entire catalog (ABC, Marvel, Star
Wars, ESPN, etc) is worth more direct to consumer than whatever small fraction
they are getting of every subscriber fee.

~~~
snuxoll
I don't think Disney produces enough content that could justify such a
service, they have a diverse catalog but it really doesn't have the depth.

Maybe I'm weird, but I get my fix of Disney IP's by purchasing a Blu-Ray once
or twice a year - I can't stand the garbage Disney puts on their cable
channels (seriously, to hell with the Disney Channel and Disney Jr.), their
classic movie library I won't let my daughter near, I couldn't care less about
anything on ESPN and ABC. That basically leaves Pixar, Star Wars, (sometimes)
Marvel and on (rare) occasion their newer films and licensed content. Why on
earth would I pay $5-10/mo ($60-120/yr) when I can spend $20-40/yr on a disc
or two?

~~~
icebraining
Right, but you are weird, just like many of us here. Hannah Montana had an
average viewership of 4-5M people. In comparison, Breaking Bad only surpassed
the 2M in the last season, and Mad Men never hit 3M. And while HM is a peak,
all their Disney Channel live-action show are in the 1-2M zone.

------
drawkbox
_The antenna is mounting a quiet comeback_

People are getting antennas but a large reason is that most cable and network
providers switched to digital only and turned off analog in the last year or
two. Digital antennas are quite nice for live not avail on streaming or
something like Vue.

I cut the cord in 2015 for a Vue/antenna/Hulu/Netflix alternative and Cox
cable in Arizona turned off analog in 2016[1] in my area on the default wire
so a digital antenna was needed. The cord cutter movement pared with providers
turning off analog, and cord cutters missing live/local channels on services
like Vue/Sling etc spiked the sales in antennas. Haven't used an antenna in
ages and digital antennas are actually quite nice, full HD or no channel, tv
static snow is dead.

[1]
[http://www.azcentral.com/story/money/business/consumers/2016...](http://www.azcentral.com/story/money/business/consumers/2016/04/21/some-
cox-cable-customers-need-mini-boxes/83249038/)

------
maguay
One question is what happens over the long term to Netflix' Marvel shows.
They're still owned by Disney, but are some of the most popular Netflix
"originals."

Pulling those—or their followup seasons—over to the Disney streaming service
would have to hurt Netflix.

~~~
Joeri
I've watched those shows and enjoyed them but I feel like they're becoming
redundant so it would probably be a good thing if netflix was forced to do
truly original content. The whole superhero thing is growing stale for me
anyway, and I suspect for a lot of others as well.

~~~
dmichulke
I have an solid antipathy against the superhero movies and I dislike that
Netflix offers so many of those that it's hard to browse their non-superhero
offers.

Please Disney, be greedy here, I know you can and I know you want to :)

------
spking
I would love to see the books for
[https://www.warnerarchive.com/](https://www.warnerarchive.com/)

$10/mo for 40+ year old TV shows and obscure films that only people over 70
would be aware of.

------
jimbokun
This transcript of a Steve Jobs interview linked from the article seems still
very relevant:

[https://stratechery.com/2013/steve-jobs-on-
television/](https://stratechery.com/2013/steve-jobs-on-television/)

Seems like Netflix is slowly chiseling a way at the TV go-to-market strategy.
Also seems like there is still a lot of resistance to the single-integrated-UI
problem. Still lots of paradigms, apps, and devices competing to be the
accepted way to find and watch video on your big living room screen.

------
shmerl
Distribution should be decoupled for content creation, then there is true
competition and everyone wants to sell everywhere, instead of pulling content
from everywhere, which only hurts end users.

~~~
skrebbel
That would be nice, but it's not how the world works.

I even doubt you'd be able to regulate it well. It would mean forbidding
Netflix Originals, for example. Netflix would just start a legally independent
production company called Fletnix and get global exclusive licenses on all
content it produces.

~~~
shmerl
So exclusive licenses should be forbidden by antitrust law. Something should
make it work.

------
raverbashing
> Netflix wasn’t simply a customer for Disney’s content, the company was also
> a competitor for Disney’s far more important and lucrative customer — cable
> TV

Remember when Sony Electronics tried to play the game Sony content companies
wanted it to?

Yeah, that worked out just fine. NOT

~~~
ctdonath
As a former Sony fanboy, Sony Electronics makes the systemic mistake of
completely forgetting the customer the moment the hardware is sold (as
contrasted with Apple, providing ongoing quality services that encourage more
hardware purchases).

My last straw was buying a Blu-ray player that claimed glorious high quality
video and lots of apps/software/content: with anticipation I had it play the
included trailer for then-coming-soon movie "Salt", expecting the very best of
my then-new 1080p system ... and was dismayed by a horribly grainy 320x240
video. Sony Electronics didn't give a ---- about content, even though the
whole point of buying the products was experiencing content.

------
gldalmaso
Aren't they basically incentivizing Netflix to enhance they own catalog? They
are already on it and they certainly got my attention for getting some pretty
good content out. Netflix can basically just head hunt great content creators
and producers which are left out of the industry altogether.

Unless they offer their content for a fraction of Netflix subscription (which
I doubt), I'm not up for supporting this disaggregation of content by each
producer. Netflix already has the tech, the infrastructure, the apps, which
I'm already paying for. Do I have to pay for it 2x, 3x, 4x?

~~~
islanderfun
Seems like the company they bought has the tech, infrastructure and apps. [1]

I'm sure it will provide value to some and not others. Overall I believe it's
smart move for Disney.

[1] [https://www.forbes.com/sites/maurybrown/2014/07/07/the-
bigge...](https://www.forbes.com/sites/maurybrown/2014/07/07/the-biggest-
media-company-youve-never-heard-of/)

~~~
lsaferite
Isn't solving the Live Streaming issue different that the VOD issue? I mean, I
know there is a large amount of overlap, but live streaming benefits greatly
from what is basically multicasting. With VOD you may have every single person
watching the same thing, but at different points. I think I read that HBO also
uses the company that Disney bought, so they must be able to handle VOD in
some form because the weekly surge of GoT watchers is likely massive.

------
MarkMc
Why don't Disney and Netflix come to an agreement where Netflix offers a
Disney-only channel? Each company can then concentrate on their core
competencies: Disney can focus on creating content, and Netflix can focus on
displaying it to people.

~~~
Noos
why should Disney make Netflix richer?

Netflix for Hollywood was just a middleman that siphoned away their profits.
Disney is just removing them from the equation because they feel they can run
their own streaming service and capture more value than they provide. You only
use middlemen when you have to, and they decided they don't have to any
longer. And this lets them charge more and give customers more value too. A
$30 a month sub with access to everything makes more sense than slowly
rotating old shows for a $10 sub.

~~~
MarkMc
Disney should make Netflix richer because they have no reason to believe they
can do the following things better than Netflix: streaming gigabytes of data
over the internet to millions of users, collecting payment and handling
customer support.

It's the same reason that Disney doesn't operate its own movie theatres: it
doesn't have any competitive advantage in this area.

Disney can offer "a $30 a month sub with access to everything" through
Netflix. That is, Netflix would offer a 'Netflix channel' for $10 per month or
a 'Disney Channel' for $30 per month.

Keep in mind that Netflix doesn't have much bargaining power - if they ask for
more than say a 7% cut of that $30, Disney can just build their own streaming
service for around 7%. Therefore it's in Netflix's interest to offer to host
the Disney streaming channel for a percentage that is just a bit less than
would cost Disney to build their own streaming service.

~~~
otterley
When Disney bought BAMtech (which was part of that announcement), they got
just that: a battle-tested, state-of-the-art content delivery platform capable
of streaming of millions of simultaneous viewers.

As for customer support, Disney has always been excellent at that. Go into a
Disney store or theme park sometime for an example. Heck, they invented the
"customer is a guest" service concept (outside the hotel context).

------
santaclaus
How does Disney's income break down in terms of merchandise/parks/cruises vs.
eyeballs paying to look at moving pictures? If most of their income is the
former, why does Disney care where or how people are exposed to their brand?

~~~
Avenger42
Their wiki page has some numbers for the last few years. Parks/Resorts (incl.
cruises) made $3.3B in 2016; Studio Entertainment made $2.7B; Disney Media
Networks (ABC/etc) made $7.8B. So if you put the TV and films together, that's
roughly triple their parks & resorts.

(Edit: changing revenue to income.)

~~~
aidenn0
What about merchandising?

[edit] about 1/3 of the parks:

Studio: 9,441

Consumer Products: 5,528

Parks/Resorts: 16,974

Media Networks: 23,689

~~~
TuringTest
You need to cater to eyeballs so that people keeps buying the merchandise.
Disney, together with Coca Cola, are the world leaders of creating a brand
that feels like an essential part of your life; and it all depends on keeping
the core product relevant.

