What Disney’s Pivot to Streaming Tells Us About the Future of Entertainment

Consumers are cutting the cord in record numbers, and they’re taking to social media to say why

The current media and entertainment landscape in the US looks a lot like the Earth following the extinction of the dinosaurs — a dominant force is losing primacy, and quickly being replaced by a swarm of smaller, more nimble competitors. But what if dinosaurs were to resurrect themselves?

Disney, a company that prides on making dreams come true, is trying hard to avoid an extinction event —  losing its audience to Netflix and other streaming services.  But the 94-year-old media behemoth is not perplexed by change as much as challenged by it. In 2016, when cable, satellite and telecom TV services lost a total of 1.7 million paid subscribers, the world’s biggest entertainment company realized it was time to wake up and adapt to the changing entertainment landscape.

And with the announcement of two new streaming services, Disney is pushing all its chips to the middle of the cord-cutting table.

It’s high time we got in this business…The profitability, the revenue-generating capability of this initiative is substantially greater than the business models we’re currently being served by,” Disney CEO Robert Iger said about the company’s big move earlier this year.

Did Disney arrive late to the streaming party? Or in this case, cable’s funeral? Experts have been portending the end of TV since 2011 but cable companies and traditional media companies haven’t exactly been taking their word for it. But with Disney’s upcoming move, there is reason to believe that we’ve officially reached that turning point.

But before we crown Mickey the king of the streaming age, let’s look at the data. Are we sure Disney’s move is justified? What can social media conversations on social tell us about evolving consumer preferences around entertainment and media?

In this post we look at the trends underlying Disney’s recent decision and discuss what the future of media and television might look like by exploring:

  • The growing army of cord cutters
  • Increased competition among streaming services
  • The future of media and entertainment

Cut the cord, not the content

‘Who still has cable?’

The answer to this question appears to be ‘fewer and fewer people every day.’ In the third quarter of 2015, the cable industry lost 486,000 subscribers. A year later, it was another 486,000. To put that number in perspective: cable companies lost close to 2,600 users a day between 2015 and 2016. Interestingly, Nielsen data suggests that in the same period, over the air and broadband-only households grew by 2.5 million.

As consumers ditched cable for cheaper and better substitutes, social media traced this cord-cutting movement. The conversation about cord-cutting has consistently climbed in the last three years, from around 20,000 posts in 2013 to over 120,000 in 2016.

 

If conversation volume is any indicator, this trend will only accelerate in the coming years.

But before we get to the post-cable world, it’s important to analyze the cord-cutting conversation on social and how it has evolved.

As cord-cutting first became a substantial trend among US consumers, social media became the go-to place for people to share tips and tricks for ditching cable.

Indeed, as social media swarmed with people wanting to learn how to cut the cord, it’s likely that the conversation created more cord cutters. The DIY tutorials, guides and resources shared on social media with best practices on how to nix cable that dominated bulk of cord cutting conversation, carrying the message — anyone can now be a cord cutter.

Disney started talking about the inevitable shift toward streaming a decade ago in 2006 but the company was wary of adopting a new business model at the cost of its existing model that was still profitable. But even the world’s largest entertainment company had to relent and play the game.

Research shows that by 2025, 50% of adults under 32 will not pay for TV.  And older Americans are also moving in the same direction. Which leaves the biggest players in the industry faced with one course of action: To go big or go home.

And this is where the story gets interesting. Consumers have not been shy about voicing their cord-cutting preferences on social, so unsurprisingly, brands have sensed an opportunity.

In recent years, tech upstarts like Netflix and Hulu have built huge businesses about providing streaming options. In the next section, we look at this increasingly crowded landscape to better understand how media brands can carve out their own niche.

Clash of the titans?

Social media emboldened people to ditch cable. And cord cutting took the cable audience over to subscription video on demand (SVoD) or non-cable streaming services like Netflix, Hulu, Apple TV and Amazon Fire.

To users, streaming services represented everything cable did not — no advertisements, on-demand quality content, and the convenience of pay-as-you-go. The chart above shows an uptick in conversation volume about streaming services since 2013, concurrent with the growth in cord-cutting conversation.

 

And competition in the space continues to intensify as new entrants fragment the market — While Netflix still dominates the segment in social media conversation and has seen solid growth in subscriber base —  7.05 million subscribers as of Q4 2016 — competitors like Sling TV and Hulu are eating into its share of the pie.

But industry giants like Disney and HBO entering the streaming market could disrupt the disrupters.

When Disney debuts its entertainment streaming service in 2019, it will claw back the content its licensed to Netflix. Although this will be a big blow to an enormous ($825 million for Disney shows and movies) and stable revenue stream, it’s the only way for Disney to build its own organic audience.

While these giants may not not agile and nimble, they do have the muscle to take over the market from incumbents like Netflix and Hulu.

In this game, no matter who loses, the audience will always be the winner.

I stream, you stream, we all stream..

Whether looking at social media data or cable- and streaming-subscription data, one thing is clear: Americans are serious about streaming their entertainment, and there’s no going back.

The average American household receives 189 channels on cable but watches only 17. Why? Because cable TV packages are filled with channels we don’t want to watch for a price we don’t want to pay. This works in favor of cable industry of course, which makes more than $19.5 billion a year from set-top box rentals alone. But for consumers, this is a raw deal, especially when the quality of content is perceived as being poor, with too many ads and a substandard customer service.

And streaming services are everything the audience was waiting for: To pick content and pay for only what you choose, stream shows and movies on multiple devices on-the-go without being interrupted by ads.

 

While this sea of change has obvious implications for cable companies, internet providers, and streaming services, it also has an enormous impact on almost every other element of the media and entertainment landscape. What does the future of advertising look like? Who will be making television shows in the coming years? Who will emerge as market leaders in this overhaul?

With every paradigm shift, obsolescence gives way to adoption of and and an adjustment to new technologies and order — for the media and entertainment landscape, it’s clear that the industry has to follow the stream.

Conclusion

Technology has upended the way entertainment is created and accessed. As content consumption goes a la carte, it’s natural that the audience will weed out media that is of subpar quality.

Today, in the US, Netflix has more subscribers (50 million) than cable TV (48 million) and over 100 million subscribers around the globe. The company attributes much of its success to big data analysis — whether it’s to predict viewing habits, finding the next blockbuster or for improving the quality of content and experience.

But a preliminary level, the data needed to follow the trend is readily available on social media. Brands can surmise where public opinion is headed by tuning into consumer conversations on social. Brands today no longer have to wait for experts to predict consumer behavior, the social web can bring these insights to them.

For more on how today’s businesses can better understand their consumers and those potential customers that they might be missing out on, download our  US consumer trends report.

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