In their second quarter earnings call, CEO Bob Iger said that they have secured a place for ESPN and Disney Channel in subscription tiers of DirecTV Now streaming service. AT&T will be offering many paid tiers for their streaming service together with a free tier.
Disney is focusing to get their networks into skinny bundles after releasing their fourth quarter earnings, and they disclosed loss of seven million ESPN subscribers in the last two years. Disney is trying to increase their viewer base and the distribution media does not make any change for them, but they prefer the new digital platform to the traditional distributors. This is because there is increasing demand for ESPN in digital distribution.
PlayStation Vue was launched before making a deal with Disney and the channel was added later. With the inclusion of ESPN in PlayStation Vue, the subscriptions went up substantially, showing the demand for ESPN in streaming services.
Dish Network has also made use of their agreement with Disney to include ESPN in their service, prior to offering a package without ESPN. Disney is planning to use this for their advantage, and this is the reason they are trying to make their space in the digital multichannel video programming distributor (MVPD) platforms.
MVPD platforms will also enable Disney to squeeze more channels into the streaming packages. This means that if a distributor needs ESPN channel, they will need to take the rest of the core channels that are provided by Disney. “The new service will take 100% of our core channels,” Bob Iger told analysts. “Not 100% of our channels, but of our core channels.”
In addition, there is a big drop in the affiliate fee for ESPN, ABC, and Disney families of networks. Despite dropping many channels, Disney could retain the affiliate fee income with new services. Another advantage of digital platforms over the traditional ones is the opportunity to advertise efficiently.
With digital platforms, the potential of targeting and dynamic advertisement insertion is very high. Though traditional platforms are trying hard to catch up with digital ones, it will be difficult to surpass the digital platforms, as online traffic flow is two way, where cable’s traffic is only one way.