There’s a lot of action taking place in the world of streaming. The first theme is titled “If Disney+ is just starting with streaming, where is Disney+ going?” It’s an interesting theme. As many of you will know from previous episodes of Monday Morning 8 a.m, I’ve been working with a very senior executive in the streaming industry who has her sights and her company’s sights set on understanding what is happening with Disney+. Quite often, she will present her team’s thinking to me, and we have discussions about whether they’re thinking about the right things.

In a previous episode, I spoke about how Disney+ is not just a streaming service but also the first place where a child finds their best friend. This got the client thinking a lot about how they should compete with Disney. She reworked their plans and talked to me about how they’re going to compete with Netflix, Disney and so on.

The first mistake she made was to assume that Disney+ is going to compete with Netflix, wants to complete with Netflix and is going to compete on the same terms as Netflix. What does that mean? Too often when we decide what business we’re in, we think everyone wants to be in that business. Everyone has to pick a word to describe the business that HBO Max, Disney+ and Netflix are in, and because these companies are slightly different, you have to pick a word that captures a little bit of what they’re all doing. That word is “streaming.”

Disney has a formidable array of assets: cruises, theme parks, merchandise, characters, movies, TV shows and so on. They’re not in the same business as Netflix. I’m pretty sure Disney doesn’t see themselves competing with Netflix. I would also go further to say that Netflix hopes Disney+ sees them as competition.

When Disney+ launched, everyone said, “They’re launching the streaming wars, and they’re going to be the world’s best streamer.” All of that makes sense, but Disney+ is the first iteration of what Disney wants to do to get closer to customers. That first iteration is a streaming portal for lack of a better word. Remember how portals were popular in the 1990s? That’s what a streaming platform is, it’s a portal.

The question is, what is the final iteration going to look like? Because this is where they’re starting. Remember when Netflix started many years ago, and they allowed you to watch one or two movies online because of bandwidth issues? If Disney+ is just starting with streaming, where is Disney+ going?

To answer that question, you have to look at Disney’s assets. Those assets are an enormous ecosystem of phenomenal firepower when it comes to branding. The final iteration of Disney+ would make more sense if Disney could integrate all of those assets. For example, why does Disney+ just have to be a streaming portal? If you watched a children’s movie and liked it, why couldn’t you be enticed to buy the merchandise and book a cruise from that same portal? Why couldn’t it be more like a version of Amazon. What if Disney+ could be an experience for the entire family?

This is what Disney has going for it: Previously, every time you interacted with Disney, it was almost like a singular transaction. You would rent a movie or watch a show and then the transaction would be over. But with Disney+, you can have the entire immersive experience of Disney, and that’s not just movies and TV shows—it’s everything they have. Secondly, Disney has the ability to do this because one of their biggest competitors, DC, cannot do this. Disney has spent a lot of time and money buying back licenses from Netflix so that eventually—and maybe it’s already in this position—every Disney show and movie can be shown on Disney+.

Why is this important? Because Disney has a connected multiverse. That means a story in one show taps into a story in another show. Now, if Disney has licensed different shows to different platforms, how are you going to follow the storyline? You’re going to watch one show on Disney, and then you have to subscribe to Netflix?

Warner Brothers has this problem. If you go to Wikipedia and search for a list of television series based on DC Comics publications, you can see ongoing shows. They have The Flash on CW; Supergirl season 1 on CBS and seasons 2-6 on CW; Legends of Tomorrow and Black Lightning on CW; Titans on HBO Max; Doom Patrol on HBO Max; Pennyworth on Epix; Batwoman on CW; Stargirl on DC Universe and CW; and Superman & Lois on CW.

If I wanted this whole immersive experience with DC, I couldn’t get it. I’d have to subscribe to multiple services.

The insight here is to truly understand—not just what business you’re in and where your competitors are—but where your competitors are going to go with their assets. And where they are now is not where they want to go. I’ve pushed back on this client and told them they have to rethink this. If you want to compete with Disney+, you have to imagine where Disney+ wants to go, not where they’re starting. You end the race with where you want to go.

For SLIDES members, we have a big update coming where we’re going to have a very detailed analysis on how to respond to competitive threats. For Insiders, we have a very big update coming as well.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #24. Many of you have found Monday Morning 8 a.m. so useful that you’ve asked us to release a book version of these newsletters. We’ve obliged and released a Kindle version, which you can find on Amazon under “Strategy Insights.” It contains the insights from previous Monday Morning 8 a.m. issues, edited into a bite-sized format that’s very easy to use. And you can learn about other FIRMSconsulting books here. 

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Are Netflix and Disney+ Really Beating HBO Max and Apple TV?

Disney and Netflix have been posting record-breaking numbers in their streaming uptake. They and Amazon Prime are the frontrunners in the streaming wars. The other players—Peacock, HBO Max, Apple TV, CBS, etc.—are not seen as frontrunners, at least not yet. The Financial Times has a couple of articles on this. There’s been a lot of press about how Disney+ and Netflix are winning while HBO Max is losing. But if you think about this carefully, I don’t think HBO Max is losing because they aren’t trying to do the same thing Netflix and Disney+ are doing. HBO Max and Apple TV need to be measured separately with separate metrics.

If someone goes to university, gets average grades, and ends up with an average job, you could call them a failure—but they’re only a failure relative to what they wanted to achieve. If they accomplished more than what they wanted to achieve, are they a failure or a success? These press results are measuring Netflix, Disney+, HBO Max, Apple TV as if winning the most amount of customers is the metric of success.

HBO Max and Apple TV are parts of a bigger empire

HBO Max and Apple TV are parts of a bigger empire. In corporate strategy, we teach very clearly that business unit strategy must enable and support the corporate strategy. It doesn’t supersede it, it doesn’t displace it, it doesn’t change it.

The question you have got to ask yourself is what is AT&T’s corporate strategy? What is Apple’s corporate strategy? What is the business unit strategy for HBO and Warner Media? And what is the business strategy for Apple TV? And is it doing what it’s supposed to do to support the corporate strategy?

If the answer is yes, then it’s a very big success.

I’ll give you an example of this. AT&T is a telecoms giant. When I was a senior partner dealing with telecoms companies, the biggest thing telecoms companies were worried about was churn. Churn is the net number of people who cancel their prepaid or postpaid contracts. And telecoms companies understand churn better than about anyone.

If HBO Max brings in a million subscribers to HBO Max, is it better than HBO Max preventing million postpaid cellular subscribers from canceling their AT&T contracts? Here’s another scenario. What if HBO Max doesn’t grow much? What if it shows no growth over the next quarter, but it prevents a million AT&T postpaid subscribers from canceling? Because AT&T has an entrenched cost base—most of it fully depreciated, the infrastructure already in place, and because the fees are much higher—the value of a million postpaid subscribers not canceling on their cellular contract is worth far more than a million HBO Max subscribers joining.

The same principle applies to Apple TV. It does not matter if Apple TV does not win an award. What matters is is Apple TV allowing Apple to reach its overarching corporate objective. And if the answer is yes then Apple TV is a success.

It doesn’t mean it’s a failure if it doesn’t compare favorably on a peer-to-peer basis to Netflix and Disney+ because it is not supposed to do that.

Churn and entering the market is a big deal. For FC Insiders who have access to SLIDES, because streaming is such a big business and there’s so much happening with telecoms and 5G networks, we will be making a big update to SLIDES to show the thinking that goes into how telecoms cannot be left behind in the 5G rollout in so far as they want to be players in capturing the value that will be built on it. They don’t just want to be dumb pipes—they want to deliver something valuable down that. And second, we also want to look at how they manage churn, which is relevant to any e-commerce company that is managing churn.

This is an excerpt from Monday Morning 8 a.m. newsletter, issue #9.