1. Disney Beats Netflix (Sort Of)

So Disney announced what its new ad-supported tier would look like this week and no one was much surprised. 

No one who was paying any attention, anyway.

The ad-supported tier will debut at $7.99, which, you may recall, is the price the ad-free tier started at. (That tier will now be $10.99.)

Again, no surprise there—so many intro prices on streaming were loss leaders intended to boost initial subscriber numbers.

In that same vein, the new service will have fewer ads than Hulu, just four minutes per hour, with no ads on kids profiles. Chapek explained it away as Hulu’s audiences being different from Disney’s, but it’s not too hard to see that real thinking there is “why scare them away with too many ads at first when we can slowly raise the ad loads later on.”

Those higher ad loads will likely wind up on the linear channels Disney has yet to announce but likely will at some point in the next year or two.

Oh, and one final piece of big news: Disney now has more subs than Netflix. On paper, anyway.

Why It Matters

I say “on paper” because more than a quarter of Disney’s subscribers come from Hotstar, the Indian property Disney picked up in its deal with Fox. 

As in 58.4 million of their 221.1 million subscribers come from Hotstar. That’s 26.4 percent, so a smidge more than a quarter of their subscriber base, to be really accurate.

And it matters because Hotstar subscribers pay next to nothing for those subscriptions. 

The lowest-priced, mobile-only service is just 52 cents/month if bought annually or 62 cents for the month-to-month plan.

The next tier, called “Super” comes out to 94 cents/month annually, while the “Premium” service, which includes 4K, comes to $1.57/month (month-to-month subscribers pay a more onerous $3.76/month.)

Point being, the ARPU on all those Hotstar subscribers is pretty low. And while Netflix has started to roll out lower priced plans in India and other emerging economies, those markets still account for a very small share of their overall subscriber base. (India’s 5.5 million subs account for around 2.5 percent of Netflix’s overall subscribers.)

So there’s all that and then there’s the roll out of the ad-supported tier.

On the one hand, Disney needs to get at least half of its subs onto the ad-supported tier in order to make it worthwhile for advertisers—hence the pricing maneuvers. On the other, Disney will likely sell ads on Disney+ as part of a deal that includes Hulu, ESPN+, ESPN, ABC and the rest of the family. (Which is more or less what their broadcast media rivals do with their streaming services)

All that said, I can’t help but think that Disney is going to struggle to get new subscribers to sign up for its ad-supported service. If they did not come on board when the ad-free service was just $7.99, I’m not sure what Disney can say to get them to subscribe now, especially for an ad-supported tier. Given that Disney+’s programming philosophy hasn’t really changed all that much.

It sort of boils down to you have small kids or you don’t, you like superhero franchises or you don’t. So not much wiggle room to pick up the millions of new subs they need.

One final note: unlike its rivals, Disney has yet to roll out a FAST or even make any noise that they might be considering one. I suspect that their experience with Hotstar has a lot to do with that— they believe they can recreate that experience in other markets, but it’s unclear whether that’s a unique one-off or a viable plan.

What You Need To Do About It

If you’re writing about this, yes “Disney Beats Netflix” is a very clickable headline and yes, dumping on Netflix is the new black these days, but you are being lax by not pointing out why the Hotstar thing gives Disney’s number a giant asterisk.

If you’re Disney, you need to figure out how to get new subscribers onto the ad-supported service. Obviously programming is going to be key here. You are likely crunching the numbers to see what you’d get out of rolling Hulu into Disney+ and waiting to see what you can learn from the Discovery+/HBO Max mashup. But if you want millions of ad-supported viewers, that may be your best option.

If you’re Netflix, you need, yet again, to get ahead of the spin cycle. Go out and tell reporters about why those numbers are skewed. And then, while you are at it, use Disney’s ad-supported rollout as a learning experience as you and Microsoft set out to design your ad-supported tier.

2. Walmart Wants To Be A Bundler

Walmart has been chasing Amazon for some time now, trying to make their Walmart+ subscription plan a rival to Amazon Prime.

So no doubt figuring they’d already nailed the “having a + sign in your name” part, it seems (at least according to the New York Times) that Walmart is looking to roll out its version of a streaming bundle. 

To that end, they’ve allegedly approached a number of major SVOD providers, including Paramount, Disney and Comcast about selling subscriptions through Walmart+. 

Details were exceedingly sketchy, but the assumption is that Walmart’s + members would get some sort of a discount from the streaming + services.

Sort of a plus for plusses, if you can forgive the pun.

Why It Matters

Bundling is in right now. A study from Hub Analytics showed that 91 percent of respondents thought that aggregating services was a good thing. VIZIO just launched VIZIO Accounts, a service that will allow users to subscribe to, pay for and receive special offers from various SVOD providers via a single on-screen account. (And I’d be surprised if the other big OEMs weren’t contemplating something similar right now as well.)

The service makes a lot of sense for a company like VIZIO—they’re already selling you the hardware and the software, why not the content too? 

Walmart, OTOH, raises an issue few people in the industry seem willing to talk about.

Image.

In many circles, Walmart is synonymous with downscale. That is particularly true in the rarified circles of Hollywood where the name conjures up images of slovenly Flyoverstanis of the sort depicted on the notorious People of Walmart site.

So not something a lot of streaming services are jonesing to be associated with.

That’s going to be a big hurdle for Walmart to overcome, which is too bad, because the Walmart+ service itself would seem to attract a very different clientele, but at a time when all of the SVOD services are trying to establish a distinct brand identity, it’s understandable why there would be a good deal of sensitivity around image.

As for why bundling is suddenly such a big deal, OTOH, that’s not much of a head-scratcher.

With so many mega SVOD services out there, churn has become a huge problem and anything that can move viewers from a month-to-month subscription to an annual one is going to be seen as a net positive. Even if providing a significant discount on that annual subscription is the only way to get them there.

What You Need To Do About It

If you are Walmart, you have a good argument that whoever can endear themselves to your mid-market middle aged, middle American audience is going to have a sizable advantage as that sizable audience slowly migrates from linear to streaming. So ignore them at your own risk.

If you are an TV executive, try and get past your own prejudices and understand the value of that Walmart audience to your bottom line—they are far more numerous than the upscale educated coastal types you pal around with, and the beautiful thing about streaming is you can appeal to both—without the time constraints inherent to linear you are fee to appeal to as many different audiences as possible. Just don’t fall into the Netflix trap of producing lots of not very good programming in the hopes it would appeal to certain niches. 

Lest you develop a reputation and all that.