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The Disney Difference

14 Mar, 2014 By: Erik Gruenwedel

The Walt Disney Co.’s recent landmark retransmission renewal with Dish Network was noteworthy for reasons having little to do with traditional retransmission.

That’s because Disney — in a first for a major content owner — agreed to license to the satellite-TV operator the right to distribute media assets such as ABC TV, ESPN, and Disney Channel to existing and future digital properties, including subscription streaming and TV Everywhere.

Dish, in turn, agreed to suspend its AutoHop ad-skipping technology on recorded ABC primetime programming until three days (C3) after initial broadcast — the period Disney makes the most money from advertisers.

Several broadcasters, including Fox, CBS and ABC, sued Dish claiming AutoHop violated retransmission and copyright agreements.

CBS CEO Les Moonves told an investor group earlier this month that precluding subscribers from skipping ads on recorded programming until three days after broadcast doesn’t work for CBS.

“It’s not quite enough for us because we’re going to want some different things,” Moonves said.

CBS’s retransmission deal with Dish expires at the end of the year.

Meanwhile, DirecTV revealed it also is in talks with Disney regarding licensing content rights for future digital distribution properties.

For Disney, the moves are another reminder that the media giant, which owns Marvel, Pixar and Lucasfilm, does more than think outside the box. It ignores conventional wisdom and embraces — sometimes stubbornly — its own distribution mindset.

This unconventional thinking includes licensing all pay-TV rights of new and catalog Disney movies to Netflix beginning in 2017.

Many observers say this prompted partner Starz LLC to opt out of a new Disney pact. But Chris Albrecht, CEO of Starz, which holds current pay-TV rights to Disney movies through 2016, told an investor group it was Starz who chose not to renew the deal in order to focus on its brand.

“At that moment we had to say, ‘What is the future?’ And the future is clearly our originals,” he said.

Disney in Its Own Cloud

Sidestepping the industry-backed UltraViolet in favor of its own, just-launched, Apple-backed Disney Movies Anywhere platform for mobile and online consumption is yet another example of Disney marching to the beat of its own drum.

With the launch of Disney Movies Anywhere, Disney hopes to jumpstart electronic sellthrough (EST) of its movies by partnering with a pioneer in digital sales: iTunes. To add clout to its digital releases, Disney is including the same (as well as exclusive) bonus material found on its Blu-ray Disc/DVD combo pack releases.

The launch of Disney Movies Anywhere has caused speculation about its impact on the future of digital delivery and UltraViolet. But assessing the merits of Disney and Apple’s union in the cloud depends on who you ask.

Wedbush Securities analyst Michael Pachter said Disney’s refusal to join UltraViolet undermines the platform and industry’s attempt at conformity — the latter key to wider consumer adoption.

“People don’t want several cloud-based storage lockers segmented by the provider of content; that’s like having one refrigerator for Coke and another for beer,” Pachter said.

On the other hand, Russ Crupnick, senior media analyst with The NPD Group, said Disney’s service could help both EST and UltraViolet.

“The more consumers are exposed to digital ownership and device interoperability the better, and the Disney brand carries the clout to build awareness and usage — regardless of the platform,” Crupnick said.

Embracing Tech on Its Own Terms

Disney, like other media companies, is trying to stay one step ahead of technology and the competition. It’s a strategy CEO Bob Iger signaled back in 2011.

“The home video business is more challenged than ever before,” Iger told “The Charlie Rose Show.” “People are still buying [discs]. … They’re just not buying as many of them. And the primary reason, I would argue, is that they have other things to do.”

Iger was referring to the coveted 18- to 24-year-old demo that consumes media on portable devices and not on the living room TV. In Disney’s most-recent fiscal call, Iger reiterated that digital distribution remains a work in progress.

“We have been bullish about digital … because we think we’ve got brand advantage there by creating destinations on digital platforms before our brands,” he said.

Indeed, to BTIG analyst Richard Greenfield, the Disney-Dish deal marks the first step toward a personalized video service whereby subscribers would pay $20 to $30 monthly for individual access to content delivered to a portable device via wireless broadband.

“Think about how the world is moving toward a more personal relationship with its media,” Greenfield told Bloomberg News. “I think that is what Dish and Disney are after with this deal.”

Starz’s Albrecht thinks the Disney-Dish deal is a harbinger of more effort in distributing video in new ways.

That point of view, and delivering content directly to the individual consumer, is at the heart of Disney’s deal with Dish. Yet, trying to sell consumers on the concept of paying for individual — not household — access to content could be a tough sell.

Disney hopes to make that choice easier.

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