Streaming Video Platforms Face Many Challenges

Walt Disney Co. announced on Wednesday that Bob Iger’s contract has been extended for two more years. They acknowledged the transformation has been more difficult than expected, even after laying off a massive 7,000 people. Iger has vowed to fix the company’s streaming business which has lost more than $10 billion since the launch of Disney+ in 2019.

Other streaming companies have also faced challenges. Even Netflix
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looked like its business was becoming challenging until it implemented a plan to thwart password sharing, which is only allowed for people living in the same home. The plan looks to be very successful.

Surprisingly, Iger told CNBC that it will likely seek a strategic partner for its ESPN unit. That suggests that the company’s plan to migrate the linear channel to ESPN+ may be faltering.

Given that many sports deals are fairly long-term, this will definitely take time for the company to get streaming rights from the league. However, the rate of speed that the company’s linear channels are sliding makes this long-term strategy more difficult.

Iger told CNBC’s David Faber where he is attending the annual Allen & Company conference in Sun Valley Idaho that the linear model “is definitely broken and we have to call it like it is.”

Many mega-deals are brokered at the Allen & Company conference each year and Iger admitted their cable networks and broadcast network ABC “may not be core to Disney,” so he may be trying to find a buyer for the networks and a partner for ESPN at Sun Valley.

A new report from CTAM noted that the average home uses 12.5 entertainment sources including 3.1 big brand SVOD subscriptions, 1.3 streaming music sources, and 1.1 free streaming TV services. Over-the-top OTT subscription services are used in 89% of U.S. households with broadband, according to Park Associations and 86% of U.S. homes have at least one streaming video service from the fifteen top subscription video-on-demand (VOD) and direct-to-consumer (DTC) services according to Leichtman Research Group. Incredibly, there are more than 300 OTT providers in the United States, according to Lemonlight.

The most popular streaming video service is Netflix (52% subscribing), followed by Amazon
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Prime (10%), Max (7%), Apple TV (7%) and YouTube TV (7%), according to Forbes Home. Among younger viewers (under 35 years old), Hulu is the most popular streaming service with 58% downloading the app on their mobile phones, according to Pathmatics.

This becomes an easy area for consumers to cut costs when budgets get tight. Many people “surf” VOD and DTC services, binge watching their favorite shows on one platform and then cancelling and moving on to another streaming video service.

This is due in part to the fact that streaming services have made this easy to do. Unlike linear networks, where an episode typically airs once each week, streaming services often drop multiple episodes—sometimes even the entire season—at one time.

For the first time in history, Netflix, Prime Video, Hulu, Disney+ and Max saw a decline in subscriber numbers since last year with the number of households subscribing to three or more services dropping, according to Hub Entertainment Research.

This suggests that we will see a lot of roadkill amongst the smaller online video companies and the larger ones will likely have to cut costs.