How Disney can imagine the “Natural End Point” of media

Imagining the “natural end point” for media in the future will help Disney make better strategic decisions on their distribution today

Disney recently announced that they were going to remove their movies from Netflix and have them exclusively available on their own streaming service.

For any strategic thinkers considering the future of media, this is interesting news.

Content has always wrestled with Distribution to capture the value in the media business, in a classic example of competition across the value chain

The guiding principle of the internet age is that “Content is King”. Distribution might change from DVDs to cable to VOD to streaming to mobile phones, but differentiated “must see” content would always find a high profit route to viewers.

And there is no media company with more “must see” content than Disney, whether it is its classic characters, its Pixar movies or its new Marvel and Star Wars portfolios. There is no media company more likely to draw customers to its own streaming service.

The financial and strategic appeal to Disney is clear

  • They can cut out all the middle man margins by going direct
  • Disney can also capture the customer data and use it to cross-sell other online content and beyond, weaving them into the Disney world of merchandise, theme parks and vacations
  • Disney can build their brand with direct relationships – in fact as advertising becomes a sales channel, every consumer facing company will move towards direct relationships

But does this decision fit the future of media?

The “Natural End Point” of media

One way to cut through the noise is to imagine the “natural end point” driven by customer needs, then work back in time towards today. What type of media service will customers want in the future?

Some customers will love to wallow in a Disney world. They will be served by a direct service for adorers of Disney, diving deep into the content, open to cross-selling, creating a Disney community.

The less-engaged mass market will want to have the content they want at their fingertips, 24/7, without the artificial barriers of channels, bundles, hardware or subscription services. They won’t want to manage multiple different services to get what they want, especially a Disney only service that only has a fraction of the content they want.

How can Disney maximize value from its content in this future world?

It is not in Disney’s long term interest to keep their most powerful content exclusive to their own streaming platform. The newest movies are their most powerful way to recruit new customers to the Disney brand franchise that fuels the Disney cross-selling machine. They want the maximum breadth of exposure to hoover up the young.

Another example of this is in the New York Times deal with Facebook – they are prepared to put selected content on Facebook for free to act as a customer acquisition vehicle to funnel new subscribers to their core site.

So it is likely that Disney will use exclusivity on their new release blockbusters to build critical mass on their streaming service quickly, then return them to broad circulation. J.K. Rowlings did this on the Harry Potter eBooks, initially they were only available through her own site Pottermore, but after a temporary period of exclusivity broadened distribution to Amazon and others.

The bottom line

In a digital world, you maximize the value of great content with a price discrimination strategy, cascading release through multiple distribution platforms, not by using its power to force customers to subscribe to a bundle of mediocre content. Disney’s resources are better spent creating new great content than running a mass market streaming service. A Product Leadership value discipline, not customer Intimacy.