Disney, Ofcom and the streaming war to come
As Ofcom dubs the UK a "nation of streamers", Raymond Snoddy wonders who will win and who will lose in the upcoming battle against Netflix
The latest Disney results disappointed Wall Street because the figures were lower than expected.
The cost of integrating Rupert Murdoch's Fox empire and preparing for a three-pronged attack on the streaming market was higher than expected and visitor numbers at its new Star Wars theme park attraction lower than hoped.
The Disney share price fell by nearly 6 per cent, although it is still 28 per cent up this year.
Apart from a skirmish in the markets none of this matters in the big battle to come against Netflix, which will start to play out in the US from November and later around the world - including the UK, which has just been dubbed "A Nation of Streamers" by communications regulator Ofcom.
Now 47 per cent of UK homes subscribe to a streaming service - some to two or more.
In the big international battle it is Disney which has the brands and the big rights and a tradition of investing for the longer term.
Despite current pain, the $71 billion acquisition of Fox will do exactly what was promised, adding to Disney's volume and scale, and the "disappointing" revenues for the third quarter still totalled more than $20 billion.
Avengers: Endgame has just become the largest grossing film of all time and Captain Marvel and The Lion King also broke the $1 billion box office mark. With Frozen 2 and Star Wars: The Rise of Skywalker to come, Disney may disappoint less next time.
The aggressive Disney streaming prices suggest that it has Netflix in its sights following price rises and the first fall in US subscriber numbers in eight years. The fall knocked $18 billion off the Netflix capital value as its share price continues to be volatile.
Disney is charging just $6.99 a month for Disney+, but throwing in ESPN+ and the ad-supported Hulu streaming service for a bundle price of $12.99 a month.
For the US at least there is going to be an already seven-way fight for eyeballs and dollars between multi-billionaire corporations - Netflix, Disney, Google's YouTube, NBC Universal, Amazon, Apple and AT&T's HBO service.
As it loses rights it once was granted by the major players Netflix is rapidly ramping up its original production, but over the medium term may start to struggle in the face of the historic rights producers such as Disney, NBC Universal and Warner Media's HBO, as well as the self-generated material on YouTube.
The major broadcasters almost certainly made a huge short-term mistake in taking Netflix money for library rights in the past. It is not a mistake they are likely to make again.
How such a battle is going to play out in Europe and the UK in particular is impossible to predict, except that not all can be winners - although they will collectively continue to eat into the audience share of public service broadcasters, a process that is already well underway as the Ofcom report UK Becomes A Nation of Streamers highlights.
The pace of change is scary. The number of UK homes taking at least one subscription streaming service has risen by a quarter in a year to 47 per cent and who knows where it might end up if all or most of the US players offer their services in the UK - and why would they not.
The average British viewer now watches three hours and 12 minutes of broadcast television a day, but that is down 20 minutes in two years.
It is among the young that the fall is steepest, as last year 16 to 24-year-olds watched one hour and 25 minutes compared to two hours and 45 minutes in 2010.
Among 18-34-year-olds YouTube tops their viewing, followed by Netflix, before ITV and the BBC kick in.
Those who have criticised ITV for launching a second series of Love Island a year are wide of the mark. It is a programme that attracts the increasingly hard to reach young and ITV has to protect its reach and advertising revenue by any means possible within broadcasting regulations.
Of course the big broadcasting moments - quite apart from news, current affairs and documentaries - come from the main public service broadcasters.
The final episode of Line of Duty pulled in 12 million viewers, Bodyguard 14 million.
But even if you had the money and human resources, neither the BBC nor ITV could cram their schedules with drama. They are required to offer a mixed schedule and anyway, there are only so many stories and they could quickly enter the territory of diminishing returns.
As Ofcom makes clear, however, it is difficult to overestimate the scale of the challenge.
The UK's public service broadcasters spent £2.6 billion last year, making more than 32,000 hours of original UK programming compared with 221 hours of original programmes by the on-demand streaming services. The combined Netflix and Amazon programme budgets are estimated to top $20 billion a year.
Despite tailoring some programmes for individual markets, the major US players essentially make Americam-themed entertainment for international consumption.
Where amid the fierce coming ferocious competition does this leave Britbox, the BBC-ITV streaming service due to launch in the autumn?
It had better have low expectations and an equally low break-even threshold.
The Ofcom decision to allow the BBC to run programmes on its iPlayer for up to 12 months is the right decision for licence payers, but will inevitably detract from the attractiveness of Britbox. The UK service may be a necessary thing to do but it is difficult to see it being transformative for its shareholders in any way.
Yet, given the scale of the increasing competition likely to hit the UK next year, if there were ever a time for the UK's public service broadcasters to trumpet their achievements and merits, it is surely now.