Week In Review: Fox and Disney and Hulu and Comcast; T-Mobile Bashes MVPDS, Buys Layer3
1. Fox and Disney and Hulu and Comcast
This was quite a week for the TV industry, but the biggest news was the announcement that Disney would be buying many of Fox’s assets, pretty much everything except News Corp., the Fox Broadcasting Network, Fox News and Fox Sports.
Why It Matters
The list of reasons Why It Doesn’t Matter might be much shorter in this instance. There’s so much going on here, the best thing is to just list out the major ones (in order of importance) and give our quick take on it.
Disney Takes Majority Ownership Of Hulu:
This could be Disney’s answer to Netflix and the combo of ESPN + Fox’s RSNs make live sports a powerful marketing tool. But Comcast. They still own 30% of Hulu and could make life difficult for Disney. Or they could sell. Or they could join forces. Regardless, they’re still a factor and with the restrictions the FCC put on them so that they could buy NBCU coming off in 2018, they’re a really big factor. So stay tuned. Also worth wondering about: will Disney give up on those two OTT apps it announced a few months back and just go with Hulu? And where does MLBAM fit in all of this?
Rupert Murdoch’s Assertion That News and Sports Are The Only Things That Matter:
We’re paraphrasing and exaggerating some, but his point was that people tune in to shows, not networks and that the only network brands that still matter on TV are built around news and sports. Maybe, but that’s also a lazy answer. There’s no reason you can’t build up a brand around a certain type of content and then expand from there. It means leaning more on niche, the way Facebook is, but there are enough YouTube channels with strong brands (e.g., DanceOn for dance) that we’re not convinced it’s an impossible dream to have a network that actually stands for something.
Giving Up The Regional Sports Networks To Disney:
Your guess is as good as ours. If sports is as big a deal as Murdoch claims it is, giving up RSNs doesn’t make a whole lot of sense, unless the idea of all those carriage and rights negotiations just wasn’t worth it. OTOH, it gives Disney a very sweet sports package with ESPN and the RSNs, one that they will likely use as a bolt-on to Hulu to set it apart from Netflix and Amazon. Which makes Murdoch’s decision even more curious.
Disney Goes International With Sky
Sky can help Disney (and Hulu) get off to a running start in Europe and in India, where they have a strong presence. The Disney brand is very strong overseas thanks to their theme parks and 75 years of marketing. One thing we wonder is if they’ll change Hulu’s name to Disney, given the stronger brand recognition. There’s an argument to be made the other way though, in that the Hulu brand allows them to be a bit edgier and that everyone will know Hulu is from Disney anyway,
All Those Advanced Units On FX
Joe Marchese and the True[X] team did a great job introducing advanced advertising tactics into FX’s inventory. We’re hoping Disney will keep that in place, because they’re a great case study on how audiences actually do respond better to those tactics.
What You Need To Do About It
Buy Disney stock as it seems to be going up. Other than that, just sit back and see how it all plays out. It will likely be a while before the sale goes down anyway—the DOJ needs to rule on AT&T/Time Warner first, so "a while" could be as long as a year to 18 months. And as we all know, a whole lot can happen in that amount of time, especially in this business.
2. T-Mobile Bashes MVPDS, Buys Layer3
T-Mobile, the brash mobile carrier that tries to act like a start-up (and succeeds often enough, to give credit where it’s due) surprised TF out of everyone this week when CEO John Legere announced they were buying pay-TV startup Layer3 in a speech laced with dissage for the existing MVPDs. “The most hated companies in America” was one of the kinder epithets he hurled.
Why It Matters
We covered this earlier in the week, but the Layer3 deal would seem to be all about the 5G. (Either that or Legere is legitimately crazy.) But we’re betting on 5G, which will provide actual competition for broadband internet, with speeds of up to 1G. That will not only break the monopoly stranglehold the cable companies have on broadband in the US, but will also allow T-Mobile to offer triple play packages of 5G + pay-TV + mobile phone service.
Layer3, which offers 250+ channels for $75, is an interesting company. They are going for the high end customer, the one who doesn’t mind paying Nordstrom prices for Nordstrom service. (Versus everyone else who is pretty pissed at having to pay Nordstrom prices for Kmart service.) So Layer3’s tech guys show up in Teslas and wear white gloves and install a beautifully designed set top box with a stellar UX. They even say “please” and “thank you.”
T-Mobile’s customers will be happy to have it, whatever format it eventually comes in.
What You Need To Do About It
Stop 5G denialism. It’s coming, it’s going to work as well as wired broadband and it’s going to blow the industry apart. Or at least accelerate change. Our sources tell us 2020 will be the year it gets real.
ALSO: If you’ve been losing sleep over the FCC's dismantling of Obama era net neutrality laws, it’s time to take a deep breath. Remember that those rules are less than two years old and then read this, on why lack of competition is the real problem.
