How Disney’s Buying Fox Could Transform Their OTT Plans

Ok. Disney has acquired the vast majority of Fox content. There could be lots and lots of ripple effects. Without even addressing how this affects ESPN and sports on TV as we know it this story is going to concentrate on how this move could change Disney’s plans to offer up a Direct to Consumer (DTC) Disney package as was reported in early 2017.

This story has been updated to reflect hulus 2017 subscription info

What this means for Disney’s future Streaming plans
For most of 2017, there has been much talk of a new Disney streaming service that would rip content away from Netflix, build original programming and be the home of future Disney Titles. The idea of an independent Disney streaming service has honestly rung hollow for me because when we look at the potential content that would be available on the service, it does not seem compelling enough. With so many streaming options out there including The big guns Netflix and Amazon there might not be much motivation to get the service in a fractured streaming landscape. Unless Disney put its entire film collection, all of its sports services from ESPN and all of the programming from ABC and The Disney Channel into one big service it would not be a particularly compelling service. And the talk of the Streaming service has never focussed on such a package. We have heard that Disney may instead launch a separate ESPN branded service that would not fully recreate the ESPN experience Based around Hockey, Baseball and other sports (No NFL, NCAA Basketball and Football). Disney has never made its full library, which is quite large available. Want to stream Bambi, Snow White, The Watcher in the Woods 1980? You can buy them, but there is no service that streams them. Parents who want Frozen can buy it on DVD and let it play constantly without a monthly bill.

What Disney May Actually Do
Disney already controls a major streaming Platform. One of the most important parts of the merger as far as the streaming world goes is that Disney will now own 60 percent of Hulu. This is because it already owned 30 percent of the company and gained Fox’s 30 percent as part of the deal. This will be the first time that one company owns a majority of Hulu which had previously been a 30-30-30 split between Fox, Disney, and Comcast with Time Warner in for 10 percent. Now Disney will own 60, with Comcast at 30 and Time Warner at 10. That changes the dynamics at Hulu big time. Now that Disney will own the majority of a growing streaming platform which also offers a live streaming/cable substitute platform, will it really try to start another streaming service from the ground up? I seriously doubt it. Take a look at these numbers regarding Hulu and keep in mind that now Disney owns 60 percent of it.  It would be so much easier for Disney to move the rest of its content from Netflix to Hulu which already has a large library of Disney movies. Hulu also has multiple seasons of programming from The Disney Channel, Disney Junior, and Disney XD. Hulu is also home to Disney’s properties through ABC. Hulu had 54 million total unique viewers and 17 million subscribers as of Jan 2017. Online offerings were even brought up Bob Iger when quoted on the merger.

“We’re honored and grateful that Rupert Murdoch has entrusted us with the future of businesses he spent a lifetime building, and we’re excited about this extraordinary opportunity to significantly increase our portfolio of well-loved franchises and branded content to greatly enhance our growing direct-to-consumer offerings. The deal will also substantially expand our international reach, allowing us to offer world-class storytelling and innovative distribution platforms to more consumers in key markets around the world.”

Will Disney followup an acquisition of this level by sinking money into a brand new project? Let’s try to answer this by asking other questions.

Important questions

Does it help Disney to launch one more streaming service among many and spend years building its brand, advertising and competing against already established properties including one that it owns?

Yes Disney can use this content to launch its own direct to the consumer product. But In order to make it worthwhile, it could cannibalize Hulu. Is that worth it? Remember Hulu had 39 million subscribers as of April 2017.

How long would it take Disney to build up over 30 million subscribers to a new service?
As of right now, we don’t know, but we do have other great examples of similar brands offerings. Which brings us to..

How many subscribers does HBO Now Have?
According to a story published by The Decider as of July of 2017 HBO now had close to 3.5 million subscribers. The service launched in 2015.

How Many Subscribers does CBS All Access Have?
CBS won’t say. The only indicators as to how many subscribers have jumped on with CBS All Access are that combined subscribers to CBS All Access and Showtime, which is also owned by CBS and offered as its own stand-alone service topped 4 million in August. It launched in 2014.

So How do the combined numbers of CBS’s Independent properties and HBO Now add up?
The math is simple. 7.5 million people subscribe to CBS All Access, Showtime and HBO combined. For all of the content offered by three iconic brands, it combines for less than a third of what Hulu already has.

How old is Hulu
Hulu has been at it since 2007. And over time has really found a niche especially with cord cutters who use the service to watch new network shows not found on CBS properties. Over the past few years, Hulu has invested in deals to transition its movie collection from C grade movies and art house films to mainstream content bolstered by Disney properties and its deal with EPIX. Disney and its partners, now Comcast and Comcast have spent 10 years building a property that is really rolling now. Why would Disney throw a competitor out there?

Could Disney Buy Out Comcast’s Hulu Share?
Yes. Certainly. There are no talks underway as of now but it would not be a surprise to see it happen. A full takeover of Hulu would make total sense being that the company seems to be consolidating other businesses. We are not even going to dive into what this means for sports in this story. Since Disney now owns 60 percent going for 90 percent of a growing platform at a time when cord cutting is on the rise and the understanding of streaming options and methods of delivery is growing would make perfect sense. This would mean that Disney would have to pay a separate licensing for programs outright owned by Comcast but understand that just because a television show appears on NBC does not mean that it is owned by Comcast. For Instance, NBC’s hit “This is Us” is a Fox/Disney property now. As of right now, 50 titles on Hulu are from NBC. Not all of them would merit a big expenditure to keep. In fact, many of the titles are very old series that don’t appeal to Hulu’s Gen X and Millennial demo. Try for a second to imagine a national outcry if Airwolf and Simon & Simon left Hulu. Disney may be willing to pony up for highly in-demand content in the future, In the end, it might be easier to keep it together as is. Disney stands to gain a lot from its current setup.

Guess for 2018 and beyond
Expect to see either a switch from Hulu’s branding to a Disney branded streaming channel or for Hulu to become the home of the Disney content that is available on Netflix. Expect to see Disneys new originals and future seasons of Disney Shows that started on Netflix to appear on Hulu when it is all said and done. Merging Disney’s earlier plans to start a new offering with Hulu just makes too much sense not to do. It would make Hulu an incredibly substantial offering