Disney and WarnerMedia are both in the process of reading their new streaming services.
Both are expected to launch before the end of this year and both are expected to heavily rely on their extensive collections of content.
However, they already appear to be taking different approaches to market and based on the information that has come to light so far, it looks like WarnerMedia could learn a thing or two from Disney.
A recent report based on conversations with WarnerMedia CEO, John Stankey, clearly indicated that WarnerMedia is looking to price its service somewhere in between Netflix and Disney. The suggestion was, this is where WarnerMedia views its position. For example, WarnerMedia reckons it has more content than Disney but less (although more quality) content than Netflix.
Whether this is true, what seems to be clear is that WarnerMedia is looking to its competition to determine its price point. It’s trying to calculate exactly where the margin lies between what consumers will and won’t pay and plant the service directly on that border.
Yes, from a business perspective this might be a good approach as the company is attempting to balance maximizing per-user revenue with user appeal. However, it is still a calculated move and that in itself implies the way in which AT&T and WarnerMedia view the service - as a calculation.
For comparison, Disney seems to be taking a far more holistic and user-oriented approach with its pricing. In a recent interview with FOX Business, The Walt Disney CEO, Bob Iger, explained that it decided on the $6.99 per month price point as it wanted to make the service as accessible to as many people as possible.
Iger specifically said, “we wanted as many people across the world to be able to afford what they love,” further adding “we purposely kept the price down so that it would be more affordable to more people.”
This is an important distinction between the approaches as it highlights that Disney is more focused on users, while A&T/WarnerMedia is more focused on what it can get from users.
The reason this is going to be important is price is matters now more than ever. More specifically, the number of subscriptions a user is willing to take on matters. There's already plenty of talk that people are starting to feel the effects of so-called “subscriber fatigue” and if correct, consumers are not going to want to continually add new subscriptions.
Therefore pricing the service competitively might prove to be a big play for new services and one Disney seems to clearly understand better than WarnerMedia as the former is focused on what users can pay while the latter is focused on the maximum they might pay.
Taking the fatigue point to the extreme - even if a consumer is less keen to add another subscription, if the price is low enough and the content wide enough, then the value on offer wins out. In WarnerMedia's case, subscribers may find they need to cancel one subscription to add WarnerMedia and that creates new issues for the consumer.
Remember, WarnerMedia is not basing its price on a value-proposition in the traditional sense, but instead on the value relative to the value of other services, and this may prove to be a harder sell down the road when other big-name services are offering comparable value for less money.
Ads are still a touchy subject
Deciding whether a service goes down the ad-supported or ad-free route seems to be one of the main decisions new services currently need to decide on and early.
For example, Netflix has done extremely well with its ad-free approach, while Hulu is doing equally as well by offering an ad-supported plan to lower costs.
It would seem WarnerMedia plans to attack the market on both fronts as the same report which credits conversations with Iger notes that the current plan is for WarnerMedia to launch an ad-supported version in 2020.
On the face of it this might seem like a good thing as offering consumers the choice of whether they pay more or less to see more or less ads puts the control in the user’s hands. However, it once again leads to the assumption that WarnerMedia will go more towards the Netflix price than the Disney+ price to begin with. The service will arrive priced as high as possible instead of settling on an ultimate sweet spot that appeals to as many users as possible.
For reference, Disney+ at its $6.99 per month is also ad-free. Again, an example of Disney not only looking to make its streaming service accessible, but also user-oriented.
Potential WarnerMedia users might like the idea of paying less to access the content, but how intrusive that ad experience might be under AT&T is another question entirely. Reports of late have indicated that ads are a big part of AT&T’s grander 'media giant' plans and will be another big part of how AT&T plans to monetize WarnerMedia.
This not only raises the question of how many ads you might see on a cheaper plan, but also what data (in addition to the usual TV tracking data) might be collected, used and sold by AT&T.
Content remains king
Content is king. It always has been and always will be but that doesn’t mean that companies can simply get away with charging whatever they like anymore. The market has changed with cord-cutting and subscription services, resulting in a landscape where consumers are now far less loyal than they might have once been.
This is already clear in the live TV streaming market and AT&T is already well aware of this. Following recent changes to its DIRECTV NOW plans, a significant number of subscribers left the service. This is in spite of AT&T now providing those consumers with free HBO.
While content is king, it is not everything, and yet the ‘content is king’ philosophy seems to be exactly what AT&T is banking on.
Yes, it has picked up a huge amount of content through its recent purchases and WarnerMedia may view that content trove as better than Disney’s, but once again, Disney is not coming to the party with a minimal or low-quality product. Disney, in fact, is in possession of many franchises that are likely to immediately garner subscriptions from fans of those franchises.
What's more, Disney is committed to making sure the newest blockbuster releases to those franchises are made available through Disney+ as soon as possible. This will likely prove to play a major role in keeping subscribers loyal.
Although the two services' content piles are different, they are both important content piles, and again, Disney is continually reinforcing the notion that its users are as important as its content.
This may prove to be the ultimate lesson WarnerMedia could learn from Disney.
Focus on the users as much as the content
In spite of both of these companies arriving with a stockpile of high profile content, they seem to be taking different approaches to estimating their service’s worth.
WarnerMedia almost certainly is valuing its worth based on the content alone (including its relativity to the content of others) while Disney appears to be valuing its service’s worth on 'content and users.'
By entering with an accessible price, by offering a variety of rich content, and by ensuring the experience is untainted, Disney is going all-in on creating a user-friendly and first experience and that is likely to be a combination that fuels subscriber retention over time.
In contrast, AT&T not only seems to be focusing less on users in general, but it also has less of a history of maintaining a user-focused approach - most recently seen with DIRECTV NOW.
AT&T utilized heavy discounts and promotions to get users on board during the early days and once it had built up enough of a base it changed the rules to better suit itself. If it applies the same approach to the new WarnerMedia service, it would seem logical the result will be the same with subscribers walking away in large numbers and to a competing service - like Disney's.