Disney to enter streaming video market in late 2019 with networks for sports, family entertainment

By Benjamin Joe
December 18, 2017

This August, The Walt Disney Company (NYSE:DIS) announced that it will be releasing two large Netflix-like streaming video services, which will both be available in late 2019 according to a report from The New York Times. One of the networks that Disney intends on creating will offer movies and television shows from all of Disney’s holdings, including the Star Wars franchise produced by Lucasfilm. On the other streaming service there will be a focus on providing sporting events produced by ESPN. In its first year, the ESPN streaming service will broadcast a reported 10,000 regional and national sporting events including baseball, hockey and college sports.

This move will put Disney in direct competition with Netflix (NASDAQ:NFLX), which will lose new Disney and Pixar films from its inventory of movies. It may also strain Disney’s relationships with cable providers who distribute ESPN and other Disney-owned channels. Each cable provider pays Disney about $8 monthly for each household that receives ESPN, and there are nearly 90 million subscribers who receive ESPN.

The decision to provide streaming content through a dedicated app is a business move by Disney to target a younger audience in response to lagging viewership. Interestingly, the ESPN streaming service will reportedly show thousands of events that do not air on ESPN currently including hockey, tennis, baseball and college sports. The new streaming service will give consumers the option to watch as much, or as little, as they want and only pay for that amount. It’s somewhat like an a la carte sports menu where fans can pick and choose what they watch and pay for those choices only.

As the ESPN network parcels out sports-oriented content, the other service will hold more family entertainment-oriented fare. These include all of its Disney animated movies as well as films from other divisions like Marvel Studios, and content from the Disney Channel. Around this time last year, there were over 100 Disney movies available on Netflix, and Hulu still advertises Disney Channel content that can be streamed on their over-the top (OTT) subscriber service. Just one of the titles, Good Luck, Charlie,  consists of approximately 40 hours of streaming video content currently offered by Hulu which will be taken off of that platform and likely moved to the Disney streaming service once it gets off the ground in 2019.

Disney’s acquisition of New York City-based Internet video provider BAMTech, which was founded in 2015 by the MLB, is a major aspect of Disney’s strategic shift in streaming video. Disney became a minority one-third owner of the company in August 2016, but one year later Disney announced that it would buy up 75 percent of the company for $1.58 billion by purchasing 42 percent more of the company; the American entertainment giant already owned 33 percent of BAMTech at that time. Disney intends to use BAMTech as the infrastructure for its streaming services because of BAMTech’s professional sports broadcasting platform.

When speaking on CNBC’s “Closing Bell” last year, Disney CEO Bob Iger said that he loved BAMTech’s model, that live, convenient sports was valuable and that Disney “felt that having control of the platform… would give us control of our own destiny.” This move is relevant to both companies because for four quarters now, Disney’s earnings have suffered, largely because ESPN has suffered. With a lack of eyeballs on its sports channel, the company discussed as early as March the idea of a direct-to-consumer model for ESPN, going beyond the idea of “skinny bundles” such as Sling TV for the sports station’s survival.

Financial analysis websites such as MarketWatch.com have reported as early as July that Nielsen studies showed that both the Disney Channel and Freeform (formerly ABC family) was losing its magic over young adults. All in all, both of those channels lost 4 million subscribers over 3 years.

In order to create a streaming application, Disney has developed technologies that could achieve uninterrupted, substantially seamless streaming networks for its customers.

U.S. Patent No. 8458755

 

U.S. Patent No. 8458755, titled Systems for the Delivery and Dynamic Presentation of Large Media Assets over Bandwidth Constrained Networks and issued to Disney in June 2013, protects a method in which media contents are delivered in an unobtrusive and timely manner via the user’s available bandwidth from the content provider before the media is viewed. The inventors of this technology recognized a need to manage and deliver large, high-quality media assets to users using their limited bandwidth in a time shifted manner. To deliver the data required to stream media assets instantaneously, the user’s bandwidth must be at least equal to the asset’s bit rate. This patent protects technology that takes advantage of prime times, or times during which it is convenient to download data, without requiring “download managers” to provide seamless viewing. A content provider may also place a digital media asset on the user’s device in response to a subscription which the user already bought.

Another asset that suggests that Disney will be investing heavily in streaming video is protected by U.S. Patent No. 9686575, titled Systems and Methods for Digital Library Channel Creation. This patent protects a method by which a digital library channel can be populated with digital content that a user already owns.

U.S. Patent No. 9686575

Once the digital library is populated with digital media assets, those assets are scheduled to be played at particular times in a way which mirrors conventional broadcast channels on television or radio.

A technology developed by Disney to better provide more personalized supplementary information to streaming video users, such as advertisements or educational material, is protected by U.S. Patent No. 9678960 titled Methods and Systems of Dynamic Content Analysis.

U.S. Patent No. 9678960

This technology enables Disney to obtain information from its customers, such as facial expressions and the environment in which the content is watched, to determine content which is suitable for and desirable to its users. This is achieved through a computer-implemented method which obtains data from the viewer’s device as media content is being broadcasted. This data may be in the form of scene recognition, or even facial expression detection and recognition. Any of these “events” are then picked up and categorized through metadata tags in which the description of different events is associated with each tag.

Disney’s promises for a strategic shift may have arrived just at the right time to boost confidence in its shareholders as is reflected by the company’s recent press release for the third quarter of its 2017 fiscal year. Comparing net income from last year’s third quarter, Disney experienced a drop of 9 percent year-over-year. Through the first nine months of 2017, Disney’s earning report reflected a 5 percent drop compared to the first nine months ending of 2016. Its revenues between last year’s third quarter and the most recent quarter are down about $39 million and its free cash flow is down 33 percent compared to 2016’s third quarter.

The Author

Benjamin Joe

Benjamin Joe lives and writes in Buffalo, New York. His past experience includes blogging work for the now-defunct social media network Muvas.com. He studied at Buffalo State College and received his Bachelor's in Journalism in the winter of 2016. From January to December of 2016, he has served as the online editor of The Record, Buffalo State's student newspaper. He also completed an internship at the Western New York radio station WUFO AM during the summer of 2014 and at a CBS affiliated television station, WIVB Channel 4, during the fall semester of 2016. For two and half years he wrote for The Niagara Gazette as a freelance reporter and is now the editor of the Niagara-Wheatfield/North Tonawanda Tribune, a weekly paper published by Niagara Frontier Publications in Grand Island, NY.

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