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Disney+ Signals New International Pay-TV Paradigm

Disney+’s rollout has been one of the most discussed and debated content service launches ever. Futuresource is bullish about its prospects in most key markets, with it expected to challenge for the number two or three SVoD position behind Netflix and (where significant) Amazon Prime Video. The depth of content at launch is impressive, with approximately 600 movies and TV show franchises, providing a long tail of Disney content unmatched on existing services and with strong appeal to families. Futuresource estimates that around two-thirds of Disney+ subscribers will have children under 12, with this base crucial in helping maintain overall subscriber loyalty to the service across the long term.

But despite all the hype ahead of launch, a number of questions remain, not least when reviewing the opportunity beyond its launch markets.

Disney’s current licensing deals in the USA, Canada, Australia and Netherlands have expired allowing it to launch with a significant library of TV shows and movies and perhaps of greater importance, movies in the first Pay window (which in the coming months will include recent box office smashes such as Avengers Endgame, Lion King, Toy Story 4 and Aladdin) and new content such as The Mandalorian.  These four launch markets are also amongst the most penetrated subscription video on demand markets in the world and will provide a good read for likely success in other countries. 

Expansion into other countries will continue throughout 2020, in Disney’s latest investor call, it announced a March 31st launch date in key European markets.  In many markets worldwide, Disney’s existing distribution deals (prior to the launch of Disney+) are with Pay-TV providers. Whilst details of the length of these deals are typically not specified, Disney will likely have been busy negotiating with a number of existing distribution partners to either buy back some rights early – on an exclusive or non-exclusive basis. 

But the arrival of Disney+ does not necessarily mean Pay-TV operators will be excluded from carrying the content, instead it heralds the beginning of a new commercial paradigm. Services such as Sky and Canal+ have enjoyed exclusive licensing agreements with Disney, with movies in the first Pay-window key to this. However, Disney will still be keen to maximise distribution and therefore will likely look to maintain relationships with Pay-TV operators, seeking carriage of Disney+ as an app or through more sophisticated integration (e.g. as Netflix has done with Sky in the UK).

But commercial terms are expected to differ significantly to the previous distribution deals, with both parties entering what is effectively uncharted territory, with each side potentially having differing views on where the balance of power in the negotiations sit. Canal+ in France is already said to have agreed a deal, hot on the heels of its Netflix announcement. This indicates a continually evolving mindset amongst the leading Pay-TV operators in terms of their relationship with third party (particularly D2C) service providers.

In addition, whilst the delayed rollout outside of its core markets was inevitable, Disney is yet to give any indication of how its flagship exclusive series “The Mandalorian” will be distributed in the interim, potentially to the frustration for many Star Wars fans in these countries.

What is clear is that the premiere of Disney+ on November 12th is the start of an evolutionary process both for the service and the strategy of the now wider Disney group as a whole. The launch comes as the integration of Fox into Disney is all but wrapped up, but the role of Fox content distribution is less clear, particularly on an international basis. What role will Hulu play in this? How will Disney choose to manipulate the first pay window? And what role do transactional movies play? These are just some of the areas to be considered and tackled over the coming months and years. 

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David Sidebottom

About the author

David Sidebottom

David is a Principal Analyst – Media and Entertainment. David has over 20 years’ experience in a research and consultancy environment and is closely involved in researching, analysing and consulting on key content industry and consumer technology developments worldwide, with a particular focus on the evolution of digital business models in the TV, video and music industry. David works with a wide variety of high profile Futuresource clients across the content ecosystem including studios, broadcasters, technology companies, hardware vendors, service providers and industry associations. He also directs Futuresource’s long-running global consumer panel ‘Living with Digital’.

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