The Walt Disney Co. could agree to multiple partnerships with pay TV and mobile operators in the U.K. to drive subscriptions to its Disney+ streaming service.
The company is reportedly in talks with BT Group as it prepares for the European launch of its streaming service in March. It could also try to bundle the product with Comcast Corp.'s Sky Ltd. — thanks to its 20 million customers across Europe — and mobile operator Telefónica SA's O2, analysts said.
These tie-ups could see Disney repeating its U.S. strategy to offer Disney+ at a discount or free, Lottie Towler, senior analyst at Ampere Analysis said. The House of Mouse's partnerships with Verizon Communications Inc. and Google LLC in the U.S. offer select customers free Disney+ access for a year and three months, respectively.
Disney could be more reliant on external partners in Europe than the U.S., according to Michail Chandakas, an analyst for Kagan, a media market research group within S&P Global Market Intelligence. In the U.S., Disney+ is bundled with the company's other streaming assets, Hulu and ESPN+ — neither of which is available in Europe.
With a finite amount of viewing time available to the public, bundling services with in-house or third-party partnerships is one way newcomers can secure eyeballs in a crowded streaming market, according to Simon Murray, principal analyst and owner, Digital TV Research. Much like Disney, U.S.-based entrants including Apple Inc.'s Apple TV+, AT&T Inc.'s HBO Max and Comcast's Peacock have opted to leverage their hardware, carrier or media assets to scale their streaming services.
Incumbents Netflix Inc. and Amazon.com Inc.'s Prime Video have at stages teamed up with the biggest mobile, broadband and pay TV providers on both sides of the pond, including Verizon, T-Mobile US Inc., Vodafone Group PLC and Sky.
However, Sky's existing Disney and Fox content rights reportedly expire in 2020, and Disney's decision to pull its programming from Netflix ahead of its streaming service launch suggests it could do the same in the U.K., according to Towler.
These deals tend to offer discounts or free availability to a streaming service for a limited period, usually to customers on premium mobile and broadband price plans, with the added convenience of paying for multiple services in a single bill. Telcos claim this helps them reduce churn on lucrative contracts.
These partnerships are not without risks. A note by Rosenblatt Securities analysts warned that bundling streaming services could result in consumers being conditioned to spend less on video entertainment as a whole.
Verizon quickly touted the success of its Disney partnership by declaring that a large portion of the 17 million customers signed up to its unlimited mobile data plans took up the Disney+ offer. The carrier keeps a portion of the $6.99 Disney+ monthly fee for subscriptions made once the free trial period ends. Murray estimates that distributors of streaming services can take between 15% and 50% of subscription fee revenue depending on the size of the streaming service.
"A big cut would be much harder to negotiate with a media titan such as Disney," he noted. The company's clout could allow it to negotiate even lower rates with potential partners, especially if it opts for exclusive deals in Europe, Murray added.
Disney did not immediately respond to S&P Global Market Intelligence's request for comment.
Adding Disney+ would also align with the industry's pivot to content aggregation — whereby streaming content is accessible on pay TV platforms — in response to the threat of cord-cutting, according to Towler. Aside from BT in the UK, reports have said Disney is in talks with Canal +, Orange SA, Vodafone España SAU and Telefónica's Movistar to distribute its streaming service.
Disney+ is coming to the United Kingdom, France, Germany, Italy and Spain on March 31, 2020, over four months after its arrival in North America, Australia, New Zealand and the Netherlands. The streaming service costs $6.99 per month and has snagged 10 million sign-ups as of Nov. 13, with analysts attributing its success to Disney's aggressive pricing and promotional activity.
