Disney is misreading the shift to streaming

Upcoming revamp of Canadian TV system could accelerate changes in United States as well.

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It sure looks like the world of traditional television imploded on Wednesday thanks to three magic words from Disney chief executive Bob Iger.

Aside from delivering a bunch of good news to investors about how movies such as Avengers: Age of Ultron propped up quarterly earnings, Iger snuck in what turned out to be a bombshell: that ESPN, the company’s crown jewel sports network, suffered “some subscriber loss.”

Cue the selloff. Disney stock tanked 9 per cent on Wednesday and continued its downward spiral Thursday, down another 5 per cent as of this writing. Worse still, investors fled any other stocks involved in TV, with Comcast, Time Warner, 21st Century Fox, CBS, Viacom, Discovery Communications and AMC Networks all falling as well.

The thinking is obvious: if viewers are starting to cut their subscriptions to sports programming – the last bastion of the cable industry – then the apocalypse for the industry is nigh. Suitably, Netflix stock hit a new record high on Wednesday. It couldn’t be clearer which way the wind is blowing.

Iger did Disney’s stock no favours with a defence of ESPN that came off as naive at best, out of touch at worst. He noted that ESPN still has 94 million subscribers and won’t need to go over-the-top with a full internet streaming option for at least the next five years, even though “we could do it today.”

That prediction may be proven to be foolish in Canada, where the veritable television atomic bomb is set to go off next year. Starting in March, cable providers here are going to be required to offer “skinny basic” packages for no more than $25 a month, followed by full pick-and-pay a la carte channels by December.

Odds are good that sports channels such as TSN and Sportsnet – the Canadian equivalents of ESPN – won’t be included in those basic packages, and that they’ll at least initially be offered as pricey a la carte options.

On top of that, Canadians will have literally triple the streaming options for most of their programming needs by the time the changes come in. Rogers and Shaw are making their Netflix-like service Shomi available to all Canadians by the end of this summer, while Bell is promising to follow suite with CraveTV on Jan. 1.

Put it all together and it means virtually every Canadian household will in the next few months examine and re-examine the need for a traditional TV subscription. An estimated 16 per cent of Canadians currently don’t pay for TV – a “big jump” from a few years ago, according to the CBC. As the cliche goes, once every household assesses the options available… well, we probably ain’t seen nothing yet.

Sports aren’t part of those streaming services and may continue to be the main draw for Canadian TV suppliers – BCE-owned TSN has an estimated 9 million subscribers while Rogers-owned Sportsnet has approximately 8 million. But those numbers will almost certainly go down with the new options coming available, as more people look to replace cable with streaming, meaning that advertising will also become a less lucrative revenue stream for the broadcasters.

Sports streaming could very well become a big thing here before the United States, and probably sooner than in five years. What will American viewers think when they look north and see Canadians getting a la carte channels, not to mention everything online?

Iger is dreaming if he thinks Disney has five years, and it’s clear investors agree.

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1 Comment on Disney is misreading the shift to streaming

  1. Sports stream in Canada is entering year 2 now. Rogers buy of NHL Game Centre was all about streaming. It will be interesting to see how this rolls out as we move forward.

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  1. CraveTV pricing will determine its fate - AlphaBeatic

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