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Disney cuts cinemas out of the loop

A perfect storm for cinema operators sees Disney join the stampede towards streaming new movies direct to consumers.

Disney made the announcement as part of a strategic reorganization of its media and entertainment businesses, which is designed to build on the impressive launch of its Disney+ SVoD service. A new media and entertainment distribution group will control every part of the content value chain, allowing it to pick whichever distribution channels it wants.

“Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value,” said Bob Chapek, Disney CEO. “Managing content creation distinct from distribution will allow us to be more effective and nimble in making the content consumers want most, delivered in the way they prefer to consume it.

“Our creative teams will concentrate on what they do best—making world-class, franchise-based content—while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms, including Disney+, Hulu, ESPN+ and the coming Star international streaming service.”

Ed Barton, Analyst at Omdia, reckons Disney is playing its cards right. “Disney+ is the most successful subscription video launch of all time which has reinforced Disney’s conviction to focus on direct-to-consumer distribution through owned services like Disney+ and Hotstar in India, while dialling down its TV channels and content licensing businesses,” he told Telecoms.com.

“Disney has long been one of the World’s great entertainers and now it has the capability to reach large audiences globally without the help of pay TV operators or Netflix. It’s tough currently to find negatives with Disney’s progress towards a model which brings it closer to its audiences while retaining more of the value generated by its vast output of beloved shows, particularly when you look around their peer group.”

This is, however, another nail in the coffin of the cinema industry, which has taken such a massive hit from the COVID-19 lockdown. Even the expensive and laborious process of making their venues ‘covid-safe’ hasn’t been enough, with Cineworld recently closing all its cinemas until further notice and Vue scaling back its operations.

The direct-to-consumer precedent was established soon after the big coronavirus lockdown started, with Comcast’s NBCUniversal quickly adapting to the closure of cinemas. Many consumer habits have been changed by lockdown and it now seems likely that cinemas may have gone permanently out of fashion.

Streaming is surely now the dominant channel for people to consume video content. Disney+ joins the growing number of SVoD platforms and many in the younger generations never watch broadcast TV at all. This catastrophe for the cinema industry should, however, be a positive for the telecoms world as people are likely to value their communications packages more highly and to be prepared to pay more to ensure a quality stream.


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