Disney this week unveiled three new video streaming apps for iOS devices. While WATCH Disney Channel, WATCH Disney XD and WATCH Disney Junior are restricted to Comcast cable subscribers who have those channels in their programming package, the deal between the two companies is an appetizer for how major entertainment studies will embrace mobile platforms in the months and years ahead.
Like with its WatchESPN application, Disney will eventually expand the reach of its newer applications to more cable systems and, presumably, satellite services. Beyond Disney, entertainment conglomerates with blue chip cable properties – Time Warner (HBO Go) and Viacom (Showtime Anytime), as examples – are cautiously inching into the mobile distribution of premium content.
The challenge is to accommodate the unprecedented demand of consumers who want to watch their favorite shows from any time and any location, while not undermining the existing cable television industry infrastructure that insists consumers pay for large blocks of channels even if they only offer a select few.
Accordingly, companies like Disney must broker deals with every cable system and satellite company that ensure that end-users are not only paying for particular premium channels, but also continue to subscribe to broader cable packages. While many of us would love to pay just a few bucks a month for ESPN and maybe $15 bucks a month for HBO (and avoid the $50+ monthly bills for more channels), those monthly subscriptions are the lifeblood of the industry and can’t just be turned off without consequences.
Complications in breaking free
The logical question here is why won’t entertainment companies just break free of the cable systems and distribute their premium content directly to consumers via the web and mobile devices?
For starters, some of the companies like Time Warner have stakes in both sides of the business (the company owns HBO, the Turner Networks and CNN as well as Time Warner Cable). Conversely, Comcast is a major content player owning NBC networks (CNBC, Bravo, etc.), as well as significant stakes in several other notable channels.
Even in cases where there is no cross-ownership, the cable systems and major entertainment companies have mutual incentives to keep the same system in place. While Disney would have no problems distributing ESPN or the Disney Channel a la carte, its more niche properties (ESPNU, for instance) wouldn’t have nearly the same audience potential without cable carriage. There wouldn’t be as many opportunities to showcase new channels (nor would there be advertiser interest or meaningful subscription revenue) if these lesser-known properties were not forced into broader cable packages.
Nothing lasts forever
Ferocious consumer demand, widespread potential for privacy, and plain common sense will likely inspire more progressive business agreements between entertainment companies and the cable/satellite industry.
The confluence of successful video on-demand services like Netlix and Hulu, the ubiquity of mobile devices and platforms that can easily access premium video content, and the inevitable arrival of an iTunes-enabled Apple TV will force changes sooner rather than later. Just as Apple pushed the music industry to reinvent itself when iTunes successfully began selling songs for 99-cents a pop, we will soon see more a la carte options that allow consumers to pay for only the programming they want.
In this interregnum, apps like the new Disney releases will only illustrate to consumers how obsolete the current cable model is for their interests. We will be so enamored with upcoming reforms that we won’t notice the inevitable increases in our home Internet bills (which will enable this distribution) and regular increases to our data plans.
Stay tuned.
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