Episode Transcript:
Marcus Johnson (00:00):
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Paul Verna (00:26):
The whole point of streaming was to get people away from paying for things they're not watching. So the more you bundle things together, the more chance there's going to be that someone's not going to want all of this stuff. So it's almost like back to the future.
Marcus Johnson (00:47):
Hey gang, it's Tuesday, May 21st. Paul and listeners, welcome to the Behind the Numbers Daily, an eMarketer podcast made possible by Awin. I'm Marcus, and today I'm joined by our vice president of Content who heads up our advertising media and tech coverage based in the great state of New York. It's Paul Verna.
Paul Verna (01:04):
Great to be here. Thanks for having me. Marcus.
Marcus Johnson (01:06):
Hello, sir. Of course. Today we're talking all about Disney, but we start with today's facts Disney related. Paul, have you ever heard of the 30 step trash can rule?
Paul Verna (01:17):
I can't say I have enlightened me and our listeners.
Marcus Johnson (01:20):
You'll find only Mr. Walt Disney or Disney people might have heard of it. So as the story goes, Mr. Walt Disney used to observe visitors in the park and see how many steps they took before littering. As a result, a trash can is never more than 30 steps away in any Disney Park. He also did an experiment where he counted how many steps it would take him to casually eat a hot dog when he would be finished and when he might need to throw away the wrapper. Wow.
Paul Verna (01:46):
Next
Marcus Johnson (01:46):
Time people go, that's
Paul Verna (01:47):
A good rule.
Marcus Johnson (01:49):
I know it is a good rule. Perhaps the mayor of New York wants to look into this approach. Wouldn't be the worst thing.
Paul Verna (01:55):
I might institute that in my house because there are a couple of people who live in this house who I think just sort of throw stuff wherever. So
Marcus Johnson (02:04):
Is Paul and Mrs. Paul. His kid moved out. So he is talking about Mrs. Paul is what he's talking about. If you're
Paul Verna (02:09):
Listening, definitely not her. Definitely not.
Marcus Johnson (02:12):
He means that I'm in
Paul Verna (02:13):
Trouble.
Marcus Johnson (02:15):
Also, apparently, Mr. Disney added a secret bar hidden inside the then otherwise dry park, which he used to entertain in guests. The speakeasy star venue located behind a large door on the New Orleans Square section of the park now runs as a private members
Paul Verna (02:31):
Club. Interesting.
Marcus Johnson (02:32):
Parents are listening to this like we're going back, get some tickets. There's a bar there. Anyway, today's real topic, Disney.
Marcus Johnson (02:45):
In today's episode, first in the lead, we'll cover Disney know in other news for you for this episode, we start of course with Disney, so anything we're talking about, so we have to Disney, Paul is the number one distributor of TV content. Number one, according to Nielsen, looking at the top 14 media companies ranked by percentage of TV usage of all the time people spend watching tv. Disney with its combination of networks, A, B-C-E-S-P-N, things like that, and streaming services, Disney plus, Hulu, ESPN plus, all of that accounts for 12% of TV usage. So Disney, their content accounting for 12% of TV usage. YouTube was in second with 10%, and then it was NBC, universal and Paramount and third and fourth with almost nine Warner Brothers Discovery at eight. Netflix just below that with eights and Fox with 6%. But going back up to the top of that list, Paul, what's your take on Disney leading the pack in TV usage?
Paul Verna (03:48):
Well, it doesn't surprise me, and they've actually been leading the pack for a long time. They have more strength across all of the key areas like entertainment, sports, and news than their competitors. I think most significantly they have very strong streaming services. I mean, Disney Plus and Hulu, both are very, very well established brands that get, they have very high subscription bases and a lot of brand value. And of course ESPN, which is built on the strength of the cable network and is now kind of in transition to a pure D two C. So they just have built these brands over many, many years and they've been more consistent than their competitors in terms of strategic decisions around how to approach streaming while still hanging on to the linear networks
Marcus Johnson (04:44):
On those two brands quickly. Hulu and Disney Plus together is 5% of all the time we watch on tv. Just those two streaming brands alone.
Paul Verna (04:51):
And I think the analysis of all these different networks and where they sit is interesting because Disney gets a lot more of that viewership from streaming than do NBCU, paramount and Warner Brothers Discovery, which are still mostly linear networks. So to me, that speaks of how Disney has balanced those things very well. They've built their streaming portfolio while continuing to be one of the big competitors in whatever is basically left of linear tv, but they've struck a more even balanced than their competitors
Marcus Johnson (05:26):
On that balance, about 60 for traditional 40 for streaming kind of share. Whereas NBC Universal, paramount and Warner Brothers discovery, it's more like a 80 to 90% traditional, 10% to 20% streaming.
Paul Verna (05:41):
So Disney is more in line with viewership and ad spending on say, CTV versus linear tv.
Marcus Johnson (05:47):
Yeah, good point. So Paul, Emma of the Verge just wrote about how Disney Plus and Hulu and those two brands you were talking about posted a profit for the first time making a combined near 55 0 million in Q $1 million, a massive turnaround from a near $600 million loss in the same period a year ago. However, ESPN Plus, which is also owned by Disney, lost $65 million. So that drank Disney's entire streaming business into the red in terms of user numbers, Disney plus, excluding India's Hot Star, added over 6 million new subscribers pushing its total to 118 million worldwide for Disney plus. Hulu subscriber growth was largely flat holding fast at five zero million, 50 million. ESPN plus lost a few subscribers ending the quarter with 25 million, half as much as Hulu. But Paul, which Disney streaming service, Disney plus Hulu or ESPN plus are you paying most attention to right now and why?
Paul Verna (06:44):
Well, I'm paying attention to all of them, and now that Disney is bundling them, increasingly selling them as a bundle, I think of it more as a portfolio. Obviously, ESPN is kind of dragging a bit there, and it's the only reason that Disney was not able to post a profit in their streaming portfolio. But on the flip side of that, I will say that they had not guided toward profitability till the end of this year. So they actually got a lot closer to it than their own guidance that suggested. So they're on track. I think they are doing as good a job as they can, understanding that there are business model issues and there's a ton of competition and there's still a lot of flux in the transition from TV to streaming. But taking all of that into account, I think Disney's doing a better job than their competitors in terms of how they're transitioning to streaming and all of those services, whether one is up a little bit or down a little bit in any given quarter, they're all very strong.
Marcus Johnson (07:48):
Very strong. Yeah, ESPN is the weaker of the three. It is dragging a bit. However, it's interesting to see how adding an ESPN tile will move the needle because Disney just recently married Disney plus and Hulu content under one app, and now they plan to add an ESPN content tile within Disney Plus by late this year and launch a standalone ESPN streaming service by the end of next few other things to watch for the rest of the year. In q2, Disney plus said it does not expect to add subscribers that would again, lose money in large part because of programming expenses at Disney plus Hot Star in India. It's lower price streaming service. Other things to watch, I mean, I'm wondering whether the theatrical movie business of Disney, I mean, how much is that suffering from these lasting effects of last year's Hollywood strikes? Is that something that could still drag the company down or is it not really impacted them too much?
Paul Verna (08:39):
I think they've mostly moved past it. I mean, obviously production times are a lot longer in the theatrical business. Frankly. I think the problem with Disney's theatrical business is that they just haven't produced a genuine hit in a long time, and that becomes a problem in the longer term because there's a whole flywheel that feeds off of the popularity of these franchises. So when you have a lot of these franchises that are showing signs of fatigue and people just not caring about them as much, that has downstream effects for the parks business, definitely for the theatrical business, but also for the parks business, for the streaming business, and even for the TV business. So it's not a position Disney wants to be in, and it's not something that's easy to fix because it's hard to predict when something's going to be hit, but I think they just need an injection of new thinking, new energy in a lot of those big franchises.
Marcus Johnson (09:36):
Yeah, yeah, Marvel, star Wars, others that just struggling at the moment to produce that hit that you're talking about. Paul, let's talk about bundling because it seems as though just when people thought they were getting rid of cable completely, the bundles back, and there's two bundles we're going to talk about here. So the first, our senior director of briefing, showy Goldman, was writing that Warner Brothers Discovery will bundle Max, which it owns with Disney Plus and Hulu. So you'll get Max Disney plus and Hulu all in a new streaming package set to launch this summer. No pricing details yet, but it will include both ad supported and ad free options. You can buy the package from any of the streamers sites, but Paul, how much does this Max Disney plus and Hulu bundle move the needle of the different companies?
Paul Verna (10:22):
A lot of that is going to come down to the pricing, but I think these companies are smart enough that they're not going to price it out of reach for people. So the goal here is obviously to just build more a bigger audience, more momentum, more subscriptions, and I think there's a strong alignment between some of the content here from Disney to Hulu to Max. So it seems like a smart bundle, but this whole trend of bundling is kind of interesting because as you just suggested, Marcus, we have moved, the whole point of streaming was to get people away from paying for things they're not watching. So the more you bundle things together, the more chance there's going to be that someone's not going to want all of this stuff. So it's almost like back to the future, I think I'll have to go back and look and maybe when we revisit our predictions episode, we can do a little check on that.
Paul Verna (11:18):
But I think one of our predictions a while back was that there would be more digital bundling, and it wouldn't just be one company bundling its own apps, it would be companies competitors bundling. So now we have this sports streaming service that is now we know it's going to be called Venue. We have this one that we're talking about now, and we have another one that I think you might be about to tee up. So there's a lot of it going on, but to directly answer your question, I think this is a smart one because it ties together some strong content. And if you think about if someone is a Game of Thrones fan or a Star Wars fan, this kind of puts it all together for them.
Marcus Johnson (11:59):
Folks might be thinking to themselves, why are these three working together to form a bundle? They're already working together on another live sports streaming service that Paul was talking about set for this fall combines Disney owned ESPN with Warner Brothers Discovery and Fox. It's going to include N-F-L-N-B-A games, and as Paul mentioned, it's got a new name, which is Venue Sports spelled VENU. You mentioned the price pool. Yeah. Will the price be right? That's a huge question because the monthly cost of subscribing to ad free versions of all those three services, the Max Disney Plus and Hulu is over 45. The plans with ads cost around 25 total. So a bundling offering likely to cost less than that. So we've got to strike the right balance between making money and also pulling people into this world. The second bundle we're talking about is reported on by Benjamin Mullen of the New York Times is one of the folks writing about this, noting that Comcast's Peacock, Netflix and Apple TV plus will also jump into a bundle together called Stream Saver. How much pour does this new streaming bundle of Peacock, Netflix and Apple TV plus move the needle for each?
Paul Verna (13:08):
This one strikes me as being more about getting people who are still on linear tv, specifically Comcast, to basically migrate over to streaming. And I mean, peacock is a Comcast network, obviously, but by throwing Netflix and Apple TV into it, it sweetens the pot for people who maybe still haven't cut the cord and Comcast doesn't want them to cut the cord, but they do want them to start subscribing to streaming content, including Peacock. So I think it's coming from a somewhat different place than the other one, but it still makes sense for people who this one is maybe somewhat more entertainment based with certainly Netflix, apple, and Peacock, although there's a fair amount of live sports embedded in that as well. But yeah, I think Comcast has done, they have had a deal with Netflix in the past where you could subscribe to Netflix through your cable TV subscription. So to me, that's more of an extension of that, which there's a lot of validity to using that approach because I know our colleague, Ross Spanish talks about it on the podcast if he could only get his parents to watch streaming content, and this is kind of a way to do that. And I'm not suggesting that this is exclusively tailored at an older audience, but that is definitely part of the appeal.
Marcus Johnson (14:36):
Yeah, yeah. I went and looked at the different bundles put together how big they might be together, and so in terms of time spent watching TV recycling back to the Nielsen numbers we talked about at the beginning, they break out the different traditional players, but they also break out all the streaming services. And so if you add Netflix's share of TV time with peacocks and with Apple TV plus, apple TV plus is the share is so small, they don't actually break it out, but it's less than a percent. But you get basically nine to 10% roughly depending on how big Apple TV plus is. So those three, if you look at Hulu, Disney Plus and Max, that bundle gets you about 7%. So it's a bit smaller, but put together, that's half of the time, it's about 16% total for those two bundles put together. That's about half of the time people spend on cable. So when added together, it's quite a lot, but it does leave some folks out in the cold pool, prime video, and YouTube and Tubi and Roku channel and Paramount Plus, et cetera. And so yeah, interesting to see how much these two bundles affect those players.
Paul Verna (15:37):
Yeah, there are a lot of dynamics here, and one of them is that with the Comcast bundle, I mean, there's so many people who are already subscribed to Netflix that it's not likely that this bundle is going to catch a lot more because there's not a lot of headroom to grow, particularly with Netflix because there definitely is with Apple tv, which as you just pointed out, it has a much smaller share of at least viewing time. So yeah, a lot of calculations are coming into play, but I think both of these bundles are smart. I think they're going to help all of the companies involved.
Marcus Johnson (16:13):
Yeah, it does seem like, yeah, some of the bigger players in these bundles, Hulus, the Netflixes will help drag up some of the shares of some of the smaller players, the peacocks, the Max, the Apple TV pluses I've got to take here. Paul, I think that I'm not only going to see more bundling, but I think with the marketing messaging, you're going to see folks moving away from month and more to per year, and I wonder if they switch the order in terms of talking about prices instead of being like, is this much per month or you can get this much per year, because that's what Amazon Prime did. They had the per year price and people just signed up to that and then they were like, this is how much it's going to be per month. And as we talked about, locking people into those yearly contracts reduces churn, which is something they're trying to do with this bundling initiative.
Paul Verna (16:55):
Yeah, I would agree with that. But I think just to push back a little bit on it, churn is now basically par for the course with streaming and especially with sports, there's more of these services getting to sports. I think they understand that people are going to subscribe on a partial year basis depending on sports seasons. So yes, they would definitely want to lock people into a yearly deal, and they're probably going to offer some incentives to do that. But I think that the future of this bundling, one way in which it's different from the cable years is that people are going to do a lot of moving around, which they couldn't do with cable.
Marcus Johnson (17:31):
It's easier to move around, but I wonder if folks will start to do that a bit less just because I think these companies are going to get smarter plugging the gaps in terms of content gaps throughout the year. For example, I have YouTube tv, and when the NBA season finishes, they don't need it anymore, but now they have the WNBA, which you can just sign up to, which I signed up to, and so I've got that for the summer. And so now there isn't a gap in the calendar where I can just cut it. And I think that folks, especially if you're giving a more heavily discounted year, it depends what the price is, but more heavily discounted yearly rate folks might every year just think, okay, which ones are we going to get? Set it, forget it, revisit it in a year's time. But we are saying about, we're talking about these bundles, all these services are still going to be offered individually, and so you all still have much more flexibility than cable.
Paul Verna (18:14):
Yeah, for sure.
Marcus Johnson (18:15):
Let's end the episode by quickly discussing a new tie between Disney and Walmart for enhanced targeting and measurement across streaming. Catherine Lundstrom of Adweek explains that Walmart's purchase data will be synced with Disney's audience graph using clean room technology in a private marketplace. It's also the first time Disney has used shopper data in streaming using programmatic and bid tech to identify audience matches like target audiences based on lapsed consumers or those open to switching brands. But Paul, what's your take on this partnership between Walmart and Disney?
Paul Verna (18:49):
Well, we've been talking for a couple of years now about the convergence between retail media and connected tv, and when we started talking about it, it was more of a promise than a reality. I think now we're seeing it play out. This is a really clear example of it at a very high level because you're talking about the, essentially one of the biggest, I mean, Amazon has 75% of the retail media market, but Walmart is a distant second, but second and obviously Disney leader in entertainment. So this is a way in which these two things come together in a very powerful way for brand marketers. Amazon is doing it within their ecosystem through Prime Video now having ads and through licensing, more ad supported sports content and using all of that shopper data to enhance targeting and measurement and attribution. So I think this is increasingly where retail media is heading to a world where it's not just about product searches, it's about something much more entertainment oriented.
Marcus Johnson (19:51):
Yeah. That's all we have time for this episode. Paul, thank you so much as always for hanging out.
Paul Verna (19:55):
Always a pleasure.
Marcus Johnson (19:56):
Yes, sir. Thank you to Victoria who edits the show. Stuart, who runs the team, and Sophia does our social media. Thanks to everyone for listening in to the Behind the Numbers Daily and eMarketer podcast made possible by Awin. Tomorrow, you can hang out with Sarah Libo, host of the re-Imagining Retail Show, where she'll be speaking with Blake Dro and Ariel Ger, all about why D two C is working for some but not others.
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