In 2018, the big TV companies finally got serious about streaming video. In 2019, it will be an all-out war as Disney, WarnerMedia and others make big, expensive bets in their escalating battle against Netflix and the other streaming giants. It’s go big or go home.
Disney and AT&T and WarnerMedia are all set to launch major new streaming video services in 2019. For Disney and WarnerMedia, the fight comes from a place of existential dread: Netflix has completely remodeled the entertainment industry in its seemingly unstoppable quest for subscribers. Amazon is another giant threat, ready to spend billions on original content while also being responsible for a huge chunk of TV networks’ existing subscription streaming revenues. And then there’s Apple, another well-funded new competitor that’s spending more than a billion dollars for high-profile TV shows.
Here is a breakdown of the three new big-pocketed entrants in the streaming video turf war, and how they hope to take time and shares away from the established tech giants:
Disney CEO Bob Iger has publicly said that going direct-to-consumer is the top priority for the company, which internally reorganized and created a new business unit specifically for its streaming video ambitions. The Mouse House believes there are enough people who would be willing to pay to watch movies and TV shows centering on Disney intellectual property, which include Disney’s own storied library of animated classics but also Marvel, Pixar and Lucasfilm. It’s a compelling pitch, and Disney is willing to cut off a lucrative revenue stream — the $2.6 billion the company makes from the licensing of its films and movies to other distributors (including Netflix) — in order to see if it’s hunch is correct.
Bright spot: Disney is off to a promising start with ESPN+, its sports subscription streaming service, nabbed 1 million paid subscribers in five months. With its Fox acquisition, Disney also will own 60 percent of Hulu, which has 20 million subscribers. Those are great options for a company that has to learn how to program and operate a subscription streaming service.
But the big bet for Disney won’t just be on Disney+. Is there a subscription product that bundles everything from streaming video to discounted tickets or other access to Disney theme parks and events? What does a Disney brand subscriber look like? That’s the ultimate question Disney is attempting to solve with the help of arguably the best programming brands on the planet.
AT&T and WarnerMedia
AT&T will have spent upwards of $100 billion to buy Time Warner and has announced that it plans to launch a streaming service in 2019 based on the HBO brand. The telecommunications giant has shared very little information about how AT&T plans to program and bundle this service and how other products and brands — including Turner, Warner Bros., Otter Media companies such as Crunchyroll and DirecTV Now — will fit into this new streaming service.
Sources inside WarnerMedia don’t even know what AT&T is thinking. “No one knows what the bigger thing is going to be,” says one executive. “We’re all just trying to figure out ways to work with each other because you don’t want to be the one feeling left out when the thing finally comes.”
AT&T’s bet is on making sure people still buy their wireless service. Exclusive programming from brands such as HBO, Warner Bros. and Turner is one way to incentivize people to go to AT&T versus its competitors. And WarnerMedia CEO John Stankey has committed to the idea that this will require more investment, even growing the $2 billion content budget that HBO was previously armed with. As far as AT&T is concerned, there are only going to be a handful of apps that people regularly use (and pay for), and WarnerMedia has to be one of those, according to comments made by WarnerMedia CEO John Stankey during an HBO company event in the summer.
Apple is at least honest: It does not know how to make TV shows. So in 2017, the company with the most money in the world went out and hired two content execs from Sony Pictures Television, the studio behind hits such as “Breaking Bad,” and gave them a $1 billion budget to work with. The directive: Big shows, with big names, such as Reese Witherspoon, M. Night Shyamalan and Oprah.
So far, Apple has more than two dozen TV projects in development and continues to take pitches. But there have been some hiccups along the way. Apple wants its programming to be as uncontroversial as possible, which has meant axing a show about Dr. Dre and requesting that M. Night Shyamalan remove religious imagery from his program, according to reports. One Hollywood source says Apple “marketing people” offer their own notes about how Apple products can be integrated into the programming, which has led to some conflicts with the creative talent.
All that aside, Apple remains an intriguing player in streaming video. It has enough cash to buy Netflix, it’s willing to spend a ton of money on high-profile programming and it plans to give away this content for free. These shows will reportedly be available inside the existing TV app available on iPhones and Apple TVs. The app will reportedly also offer subscriptions to services from other programmers — and directly compete with Amazon’s Prime Video Channels program. (This is good news for OTT companies that have become a bit too reliant on Amazon for subscription revenues.)
But the most fascinating thing about Apple is, similar to Disney, the potential for an Apple bundle that includes streaming video but other products and services ranging from Apple Music to AppleCare. For Apple, video will just be a means to an end.