Disney v Netflix – business as usual as the ‘phony war’ plays out

SUMMARY:

Disney’s war on Netflix is on hold while its acquisition of Fox gets the necessary regulatory nods, but CEO Bob Iger isn’t sitting still in the meantime.

One of the most startling M&A announcements of 2017 was the planned acquisition of assets from Rupert Murdoch’s Fox media empire by Walt Disney, another move designed to see Mickey Mouse firing warning shots at upstart pretenders such as Netflix.

The regulatory approval processes for the deal have been set in motion around the globe and for the moment Walt Disney CEO Bob Iger is held ‘circling the airport’ awaiting the necessary persmissions to proceed. But he remains clear of the underlying strategic goals if he succeeds in closing the deal:

It will deliver more content and the production capabilities and talent to produce even more. It will enhance our direct-to-consumer initiatives with platforms, technologies, brands and existing customer relationships to build on. And it will greatly diversify our businesses geographically. All three of these elements sync up perfectly with our own core strategies, and all three are designed to create growth in a very dynamic global marketplace.

But for now, there’s work to be done in securing Disney’s role in the direct-to-consumer, subscription entertainment model of the digital economy, not the least of which is the corporation’s launch of a direct-to-consumer offering built around its ESPN sporting brand. This is a big roll of the dice, says Iger:

This new business will launch sometime this spring when we unveil a completely re-conceived and redesigned ESPN app which will deliver important new services and experiences to users.

The changes will be dramatic, with more compelling visuals, as well as an easy, intuitive interface and exceptional video and sound quality. Users will also enjoy an increasingly personalized experience as the app blends explicit choices with implicit behavior to curate a unique mix of specific, relevant content tailored to the taste of each individual user.

This one app approach will deliver three main features. It will provide countless scores and highlights, as well as podcasts and other sports information with a more user-friendly mobile interface. It will enable access to live streams of all  ESPN’s networks providing consumers or subscribers to multi-channel packages.

And it will feature our new ESPN Plus subscription service. Powered by BAMTech’s proprietary technology, the service will offer a greatly expanded array of programs and live events for sports fans who want even more content, as well as for fans interested in sports and events not currently featured on the main channels.

It’s a major overhaul, he adds:

The technological guts behind the entire ESPN online or app experience is being completely redone. The app will be a completely new app. The app itself will have three primary features. The first is the obvious – it’ll have tons of scores and highlights and new stories about sports. That will be highly personalized, both implicit and explicit. It’s going to use the BAMTech engine, data collection, data management and all of the bells-and-whistles from a personalization, customization perspective that that can provide.

That will be evidenced in both video, as well as the written word that’s presented, the stories that are presented, customizable obviously by teams, by locations, by general interest. Machine learning elements of it will enable the app to determine what someone is interested in and feed them more of that as they use the app more.

The second feature is live streaming of the networks themselves. That’s under authenticated circumstances. So, if you are a subscriber to an existing service or if you want to subscribe in the future, you’ll be able to use that to stream ESPN1, ESPN2, ESPNU, et cetera. If you want to watch it on a small screen, a mobile screen, obviously the app will provide that. The Watch app today does that. But you can also use a variety of different devices. I happen to use Apple TV or I AirPlay. I use Apple TV to access the app, but you can also AirPlay it directly from your mobile device to a large television.

And then, of course, the third feature is going to be the Plus feature. We’re actually calling it ESPN Plus, because it’s offering an incremental thousands of hours of live sports programming basically to the ESPN experience. And then, in addition to that, that would be the home of the 30 for 30 series; the entire library of 30 for 30 product will be on there. And we’ll continue to invest in original and exclusive content just for the app.

BAMtech

The new app will debut later in the Spring on a variety of platforms, including Android. iOS, tvOS and Chromecast. Iger cites Disney’s BAMtech platform as the enabler for this new push, with more to come:

We plan to invest further in the direct-to-consumer feature, adding more live games and produce sports programming, along with even greater personalization in the years ahead. Our upcoming Disney direct-to-consumer service will also combine the full range of BAMTech’s capabilities with some of the world’s most popular IP to deliver a compelling consumer experience when it launches in late 2019.

He adds:

In terms of how the product is actually created, BAMTech largely is responsible for the technological underpinning on audience management, to some extent some sales as well, because they have a lot of experience not just in how to create these experiences, it’s also collecting user data, managing customer acquisition, customer retention, billing, and then all the necessary dynamics or technology needed for far more dynamic advertising opportunities and experiences. And so, the editorial side of ESPN will still flow through ESPN, work in conjunction with BAMTech. But the technology side is largely BAMTech’s responsibility.

Presumably BAMtech will also have a major role to play in Fox’s future as well? Iger is cautious about presuming anything:

I can’t really say what we will do post regulatory approval on the Fox acquisition. We’re looking at a number of different organizational opportunities in terms of how we structure. Clearly, we’re interested in some form of conformity when it comes to technology. When I mean conformity, I just mean basically being more efficient and being more consistent and using basically our best talent and the best technology that we have across as many businesses as possible.

My take

We predicted that 2018 would be year of digital media provider wars after a couple of years of growing tension as disruptors like Netflix got under the skin of the studio giants. This period will probably be looked back on as the phony war time. Naked conflict hasn’t broken out just yet, but we all know what’s coming. Meanwhile Iger continues about his business, putting in place the necessary foundations to support Disney’s ambitions.

Image credit - Disney

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