M+E Connections

Questions still linger after Disney announced this week that it upped its investment in streaming-video tech firm BAMTech to a majority stake, and planned to use that company’s technology for a new Disney-Pixar streaming service, and as part of an expanded ESPN-branded streaming service.

One of those questions was whether BAMTech will continue to provide streaming services to Disney rivals or eventually become just an exclusive provider of streaming services for Disney. After investing in BAMTech last year, Disney is now “investing an additional $1.6 billion to increase our stake from 33% to 75% and acquire control of the company,” Disney CEO Robert Iger said Aug. 8.

In addition to Disney, BAMTech’s clients have included HBO and Discovery Communications.

HBO may have already been looking to end the deal it has through this year under which BAMTech provides its streaming technology to run HBO Now and HBO Go, published reports stated late last year. HBO didn’t immediately respond to a request for comment by the Media & Entertainment Services Alliance (MESA) Aug. 10.

“It’s quite possible that Disney will use BAMTech as their exclusive streaming technology platform,” Erik Keith, principal analyst for global telecom technology and software for research firm GlobalData, told MESA.  But he added: “Then again, if the HBO contract brings in strong revenues, why terminate that deal? HBO and Disney do not compete for the same core audience so I see no real reason for Disney to end BAMTech’s HBO deal.”

Disney’s decision to take a majority stake in BAMTech likely won’t have any short-term impact on the wide-ranging deal that Discovery and BAMTech announced last year under which those two companies formed BAMTech Europe, a new digital technology provider that they said, in a joint announcement, was “dedicated to working with content owners, broadcasters and OTT platforms to enhance their digital capabilities, reach and performance across Europe.” Discovery, BAMTech and Disney didn’t immediately respond to requests for comment.

Disney’s increased investment in BAMTech “was not unexpected, instead occurring somewhat earlier than we thought it would have,” Pivotal Research Group analyst Brian Wieser said in a research note Aug. 9. Whether Disney would have been “better off … buying the company outright vs. serving as a customer with significant influence is unclear,” he added.

Also not yet clear was the pricing of the new Disney-branded streaming service, or whether Disney’s enhanced ESPN streaming service will be enough to turn that division’s performance around enough to stop it from being the drag on Disney earnings that it’s been for a while.

Disney’s decision to go direct to consumers with ESPN “adds more uncertainty” to the company’s outlook, “heightning concerns of an acceleration” in subscription declines, J.P. Morgan analyst Alexia Quadrani said in a research note Aug. 9.

But “Disney not moving forward on its own would be a mistake given the changes in the ecosystem and similar direct to consumer launches from most of the company’s peers, and we also believe this decision could provide Disney with some leverage ahead of its upcoming affiliate renewal cycle,” she said. Although “industry-wide sub declines remain a risk,” she said she expected ESPN “to at least benefit going forward from inclusion in all announced” virtual multichannel video programming distributors and over-the-top (OTT) offerings.

The ESPN OTT service “may prove more earnings accretive” than the new Disney- branded service “in the near-term,” Morgan Stanley analyst Benjamin Swinburne said in a research note the same day. It’s “important to move incrementally towards OTT distribution of ESPN now so that as new rights deals come up in 2021” and beyond, Disney/ESPN “can offer truly unique distribution” that includes broadcast (ABC), cable (ESPN) and OTT, he said.

As MESA reported Aug, 9, Disney’s decision to pull its Disney and Pixar movies from Netflix starting with 2019 theatrical releases as part of its plan to launch its own Disney-branded direct-to-consumer streaming service stands to impact Netflix – although how much remains to be seen.

Iger also pointed out Aug. 8 that Disney continued to debate what to do about future streaming of its Marvel and “Star Wars” movies, so whether they will be included as part of the Disney-branded streaming service, be offered via separate services, or continue to be offered by Netflix remains a lingering question as well.