1. Disney Raises Hopes

Disney made the long-awaited announcement about their new Disney Plus OTT service this week, which came with a number of surprises.

Why It Matters

The biggest surprises were that the service would be ad-free and only cost $7/month. Many people, ourselves included, had expected that there would be both ad-free and ad-supported versions, with the ad-supported version at around $6/month to keep it in line with Hulu, and the ad-free version at closer to Netflix's $12/month price.

The new assumption then, is that Disney is going for volume—they are looking to sign up as many users as possible so as to take on both Netflix and the upcoming Flixes by keeping their offering cheap and ad-free.

The other surprise (sort of) was the confirmation that Disney will likely offer some sort of Hulu-ESPN-Plus bundle. It's “sort of" surprising in that we had been predicting a 2020 start to the Great Rebundling for some time now (and to be fair, so have many others) so the announcement is a bit ahead of schedule.

Rebundling is bound to happen though, as a way the stop churn in the face of the Flixcopalypse where viewers will soon have more subscription options than their budgets allow and thus will be churning like crazy. By creating bundles that lock viewers in for a year or more in return for lower pricing, these new bundles can help reduce churn.

One Disney Plus feature that is very clever is unlimited downloads. As anyone who has ever parented a three year-old can attest, children have an unquenchable desire to watch their favorite shows multiple times each day, which makes downloading a godsend to parents everywhere.

We fully expect Disney Plus to become a hit, as Disney seems to have realized that they needed to fill a niche—the family friendly OTT app—and they did, with Star Wars, High School Musical and other family friendly franchises leading the charge. That makes it easy to sell to that demographic and Disney has all manner of stores and theme parks and cruises and websites with which to promote their shows.

What You Need To Do About It

If you’re one of the upcoming Flixes, this probably means you’ll need to launch a $7/month ad-free service too. Or maybe even a $6/month one. Because competition. (Don't worry though, in a few years, when audiences have all bought into your services and you've more or less doubled prices, you can roll out ad supported versions for less.)

If you’re one of the existing Flixes, you’ve got to figure out what your plan is with kid’s programming. Because there are a range of non-Disney options that appeal to kids (look at what Nickelodeon has been able to do) but you'll need to figure out what your niche is versus Disney.

If you’re a reporter, stop calling Plus "Disney's Netflix killer.” It’s not killing anything because the market is surely big enough for another new SVOD service or two or five.

2. YouTube Raises Prices

YouTube raised the price of its YouTubeTV vMVPD to $50/month, bringing it in line with Hulu, DirecTV Now and Fubo. 

Why It Matters

While it should seem obvious that all the vMVPDs are doing the old “charge far too little at first so that you can gain share, then slowly raise prices bit by bit” trick, many in the trades have been acting as if these $5/month price raises are significant, rather than part of a longer term plan to bring prices up to a place where the vMVPDs are also making money. (You may have heard it referred to as "boiling the frog.")

Yesterday’s “skinny bundles” have turned into “mesomorph bundles” of over 80 channels and YouTube’s price hike was likely due to the addition of additional channels from Viacom and Discovery.

What all these vMVPDs seem to have discovered is that consumers like the superior interfaces and TV Everywhere-like functionality they have on offer, but they are not yet ready to give up their hundred channel bundles. It makes for an easier transition then—similar line-up, better UX and much lower price. So much so that we're expecting vMVPD audiences to double in size yet again this year, passing the 15 million mark.

We suspect though, that those $50 price points are going to start to seem high to a lot of people with the advent of the Flixcopalypse, that with people paying for so much for so many subscriptions (even $7 ones) we will see the return of the skinny bundle—super skinny bundles to be exact, consisting of broadcast networks with cable news, sports and non-fiction programming thrown in as add-on options.

What You Need To Do About It

If you’re a vMVPD, you’ll want to keep improving your product so that you can continue to justify the cost. That shouldn’t be all that hard, because right now, even at $65/month your offerings would be a steal.

If you’re a cable network, make sure you’re on as many vMVPDs as possible. Cable networks without strong brand identities are most at risk in this new world, and vMVPDs are tracking what people are watching, so that when they assemble their newer, skinnier bundles, they’ll know which networks to include.

If you’re a consumer, don’t get worked up about a few dollars a month. The vMVPDs are still a great deal and they’re giving you all the TV Everywhere functionality you’ve been asking for at a price point you won't likely see again.