Disney’s Big Bet on Digital Distribution


Disney (s DIS) unveiled its plans to combat the loss of DVD sales and bolster digital distribution during its 2011 Investor Conference, unveiling a Studio All Access initiative that will allow consumers to purchase its content digitally and watch it across a number of devices. At the same time, the company raised rates for companies like Redbox (s CSTR) and Netflix (s NFLX) that distribute DVDs to consumers.

The future of Disney’s film and TV distribution hangs in the balance, particularly as the company seeks to deal with a weakening DVD market. In his remarks, Disney CEO Bob Iger noted the company has been experimenting with a number of strategies for dealing with the onset of new digital platforms and technologies, through a series of short-term deals with various distributors. The plan for Disney is to “be early and learn early” on new technology platforms, trying out various models to see what works and what doesn’t.

In some ways, that explains Disney’s somewhat scattered digital strategy, particularly as it relates to the distribution of ABC broadcast content. While it makes its TV programming available through Hulu, Disney shocked some when it released its own iPad app ahead of the release of the Hulu Plus subscription service (which also has an iPad app). It also was one of the launch partners for Apple’s (s AAPL) 99-cent TV rentals program through Apple TV, and struck a deal with Netflix (s nflx) for streaming some ABC and Disney channel shows.

The good news for Disney, according to Iger, is that the revenue it has earned through various digital initiatives is incremental to what it would have earned through more traditional distribution outlets, and not cannibalistic.

With that in mind, Disney is launching Studio All Access, a digital offering that will provide consumers a simple way to purchase and access Disney movies online and on various digital devices. By doing so, Disney hopes that it can get people to buy and own its movies rather than renting them through different platforms.

In many ways, Disney’s brand and franchise strategy gives it a boost over other studios in rolling out such a strategy. As the provider of animated and family-friendly content, Disney has a library of content that kids will watch over and over again — and parents will pay to own. Enabling them to view that content on multiple devices in a simple way just makes sense.

At the same time, Disney announced it’s raising the rates it charges DVD rental companies like Netflix and Redbox (s cstr), to wholesale rates of $18 per DVD for new titles, and $10 for discs after a six-week delay. That could squeeze margins for those distributors, particularly for Redbox, which charges just $1 a day for its kiosk rentals.

Finally, Disney is examining its windowing strategy, mixing up how soon content is available to consumers and how it’s priced. The company has already shown some willingness to experiment, with the release of Alice in Wonderland Blu-ray discs a little earlier than usual, a move that annoyed some theater owners.

“Windows continue to be challenged, with far more variability in pricing,” Iger said. The CEO cited the importance of making content available to consumers or risking piracy due to consumers’ desire for instant gratification. At the same time, he said the company needed to be judicious and thoughtful about the timing and volume of content it brings to the market under these new windows.

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“The plan for Disney is to be early and learn early on new technology platforms”

Ha! The train has already left the station and they are still haggling on the cost of the ticket.



Great to see a studio trying new things but the bottom line is consumer’s are no longer seeing much value in purchasing & owning movies. That gravy train is ending.

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