Disney+ has struck a non-exclusive deal to be carried on Sky Q in the UK and Ireland. Available from launch on 24 March, at this stage there will be no bundling and as such there will likely be less co-promotion and prominence on the user interface than has been seen for Netflix.

Sky has relinquished exclusivity over Disney films, although new releases will continue, for now, to be available on Sky Cinema, as well as Disney+. The volume and the quality/desirability available to Sky will remain the same.

Just as Disney content is essential to Sky, Disney+ needs Sky to get scale quickly. Sky, which is shifting the emphasis away from its core football offering, needs Disney content, and certainly couldn't lose it. But given that Sky homes are among the most likely to subscribe to Disney+, and with Disney's enthusiasm to grow scale as quickly as possible, Disney needs Sky just as much.

Recruiting 29 million subscribers in twelve weeks, Disney+ has stormed the US market. Furthermore, the two million gain achieved after the holidays and the completion of The Mandalorian, relatively high ARPU, and rising Hulu and ESPN+ subscriptions bode well.

Conversely, booming (but expected) losses of direct-to-consumer platforms—due to increase as Disney+ launches in Europe in March—are undermining group profitability.

But, with a total of 64 million direct subscribers Disney can now claim a size and momentum that puts it in the league of the pure digital platforms—crucially backing its stock market narrative.

When its acquisition of 21st Century Fox closes, Disney will own 60% of Hulu. If it bought Comcast’s 30% stake (and WarnerMedia’s 10%), it could fully leverage the platform for its US direct-to-consumer strategy

Comcast’s Hulu stake has little strategic value to it. We argue it should sell to Disney in exchange for long-term supply deals for ESPN, as well as for the upcoming Disney+ and Hulu, similar to its recent pacts with Amazon Prime and Netflix

This could naturally be extended to Sky in Europe depending on whether Disney decides to launch all direct-to-consumer or sticks with pay-TV in certain markets

There is a belief in some quarters that there is space for a myriad of large SVOD services in the UK. We question whether there is room for more than the current three pacesetters; Netflix, Amazon and NOW TV

Like the UK, the US market is dominated by three services, and there is evidence of an appetite for further offerings. But the US market is conspicuously different to the UK's, with the forces behind cord-cutting in the States less apparent this side of the Atlantic

Potential domestic UK services would struggle to compete with the resources—supported by debt-funded and loss-leading models—that foreign tech giants can marshal

Disney’s potential acquisition of certain 21st Century Fox assets is assuredly a play for further scale at a time when the company’s traditional domain, the family home, is increasingly welcoming services such as Netflix.

The deal will consolidate Disney’s dominant film business. But also, the robustness of traditional television, especially 21CF’s cable interests, along with IP assets, will allow Disney to better control the inevitable viewer transition from linear to online and on-demand.

Becoming the one media company with both a strong broadcast and online offering—the control of Hulu, a new Disney streaming service, ESPN+ and other add-on services—could grant Disney the ability to navigate the storm of change and dictate its own future.
 

Despite significant changes in people’s video viewing habits over the last few years, the TV platform landscape has appeared to have reached an equilibrium.

We expect pay-TV to retain its utility status for most existing customers. At the margins, movement from Sky and Virgin Media to free-to-air or pay-lite services will be mitigated by population growth.

The excitable growth phases for Netflix and Amazon are likely to be over, but they have carved out prominent positions in the market. Meanwhile, the uncomplicated allure of free TV remains strong for half the UK.

The TV, the main screen in the house, is rapidly becoming connected to the internet, opening a new front in the battle for people's attention

Tech players, pay-TV operators, and manufacturers are all aiming to control the user interface, ad delivery and data collection, leaving incumbent broadcaster interests less well represented

To protect their position, and the principles of public service broadcasting, broadcasters will have to work with each other at home and in Europe to leverage their content and social importance

We interviewed the biggest hitters in the UK television production sector, asking them about the current issues affecting their industry, such as consolidation, Peak TV, and Nations and Regions quotas

Most pertinent, however, was the production sector’s relationship with the new buyers—Netflix, Amazon, Apple et al.—and how their approach to them differed for each one, as well as traditional broadcasters when pitching, negotiating deals or producing programmes

With views anonymised for candour, this report is an honest representation of an industry where quality and volume are both at an all-time high, despite the challenge of change brought about by these new players

Our latest forecasts predict traditional broadcasters will account for 72% of all video viewing in 2027, down from an estimated 82% in 2017, reflecting the continuing adoption of online video services across all UK age groups.

Additional viewing of online short-form content such as YouTube will keep pushing overall volumes higher, with SVOD services serving more as a substitution for linear TV.

The extent will be greater among younger age groups, for whom the shift has already been significant. We predict that in 10 years just 42% of 16-34s’ total viewing will be to conventional broadcasters versus 91% for the over-55s.

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate.