Disney and Integrators versus Aggregators | Hacker News Reader

Disney and Integrators versus Aggregators

stratechery.com

119 pointssimonpure74 comments

> Aggregators seek to serve the maximum number of consumers. Integrators seek to monetize consumers to the maximum extent.

I think this hits the point on the head here. The most recent example of this is Disney setting the rental price for their new Mulan film at $30. Keep in mind, that's $30 _on top_ of whatever you're paying for your Disney Plus subscription.

Quality issues with that film aside, the fact that Disney was able to charge _so much_ above the market norm for rentals ($2-$5) forecasts a future where streaming companies slowly increase their prices as bad as the cable television companies of yore.

I agree that increased integration and dominance can lead to higher prices (as you mention with cable), but is this a "traditional" rental?

I was under the impression that it was intended to make up for the fact that many theaters are closed or people don't want to go out to them. Pricing is more in line with a set of first run movie tickets for an adult and a couple of kids or a pay-per-view event.

Still, I wouldn't be surprised if it's also a way to gauge what people are willing to pay for new, high profile Disney material via streaming services and might signal similar high-cost rentals in the future. How much would people pay to watch (for example) the next season of "Mandalorian" a month before it shows up in the normal Disney+ listing?

You're right on the price, but it looks like the $30 didn't fare well for Disney.

https://www.theguardian.com/film/2020/oct/12/cinemas-shocked...

> However, it appears Disney does not currently have plans to charge extra for Soul, which will be made available on 25 December.

Streaming hardware is another perfect example of this dilemma. I recently signed up for HBO Max thinking it would run on my Roku, because why wouldn't it? Turns out that HBO can't have more than one paid service streaming to Roku devices at a time per Roku's TOS, so they're favoring customers that are still running the now-deprecated HBO service. It's insane.

I still dont get how they have HBO MAX and HBO Go. Why is there two and why do they get different stuff? That wolves show is only on Max. :eyeroll:

HBO Max subscription credentials can be used in the HBO channel on Roku devices, although you don't have access to the Max-exclusive content, just the HBO parts.

They were able to do this because there were no viable options with Corona keeping the theaters closed. Doubtful people would be willing to pay that rental fee if they could have gone to the theater instead. However, $30 for a mom/dad/2-kids is still way cheaper than going to the theater. For people that hate going to the movies, this could be a new acceptable norm.

Unless of course single people are not a family of 4 and should not have to pay extra because of that.

Hmmm, I spy an opportunity for Amazon to use their home drones to offer discounted prices if there's ever only one person watching.

Even as a single person, $30 sounds cheap for the movies with the expense of travel to the theater, ticket prices, snacks, etc.

Matinee showings tend to be around $6-8. $5 of snacks and per-mile total costs of around $0.40/mile, for a 10-mile round trip, still only bring that up to around $15-17.

Plus an hour of travel/prep time.

And matinee is cheap because it's an inconvenient time.

I like to think I live in a pretty affordable city and that just sounds insane to me. I can find $5 matinees of old movies on slow days but a new release will still cost me $12/ticket and $18/ticket on weekends. As for snacks I looked and the theater is currently running a special for $10 popcorn and a drink combo.

A $10 popcorn and drink special. $18.00 dollar tickets.

That sounds like a very poor cost/value.

A sporting event, visit to a zoo offers so much more at that price point.

City matters. I lived in middle GA, matinee showings were $8 or so. And a theater had all-day matinee prices on Tuesdays (including for 3D and IMAX showings), so I saw a lot of movies on Tuesday evenings. But go north to Atlanta, and ticket prices pretty much doubled and you did not get a better theater experience for it.

Also, $5 snacks sounds like the cheapest snack they had. If you bought popcorn, it started at $6 or $8 for the small, even in middle GA.

Well talk about beer in a hockey or football match

But you can watch many movies for free on your cable or whatever Netflix you are already paying for.

So is this specific movie "$30" more valuable than any free alternative? Or is it the "newness" you are paying for? Have you7 watched all other movies worth watching already?

I would guess that people are (or were) paying extra to go to a theater because of the spectacular large screen and the experience in general. One feature of going to a theater is that you have to watch the movie in one sitting and there are no ad-breaks. That can add to the totality of the experience. And it's fun to get out of your house and to do that you need a reason .

They can share with friends

They don't have to pay extra. They pay the same amount for one unit of (watch event, time) that everyone else does.

The family of 7 also doesn't pay less.

No easy way to charge per viewer, so they gotta price it once-sized-fits-all.

> For people that hate going to the movies, this could be a new acceptable norm.

I'd pay $30 right now to see Tenet in 4K Dolby Vision/Atmos via streaming.

Streaming such a high fidelity movie seems like a waste. Seeing the difference between a UHD 4K Blu-ray and a stream of the “same quality” it’s almost night and day.

I do have most Nolan films in 4K Bluray but Tenet isn't available yet. Before buying the physical media I'd be more than happy to see it via streaming with acceptable quality.

On the other hand, if the cost of streaming it as a rental is as high as the physical media copy...

Totally. But as a Nolan fanboy I really want to see Tenet and wouldn't mind paying extra to see it before the physical release.

Id actually recommend watching it at home. Without subtitles that film is difficult to watch in a cinema.

Or if you have 3.1 (or better) stereo set up, you could probably just turn the center channel higher relative to the rest to increase dialog (which is usually on the center channel).

Would be great if HT receivers had a mode to do that without having to manually increase and decrease the C channel.

If you can afford a comparable display and sound system to a Dolby certified cinema then $30 means a lot less to you than the typical viewer

If you can't afford $30 then what is wrong with waiting until you can?

If you can't afford $30, then you never will.

Nothing! But the point I'm making is that Dolby Cinema isn't appreciable for most consumers' home theaters and that price point might be a bit different for someone who has a home theater with the capabilities and has spent the time/money calibrating it.

You don't need super high end gear to appreciate Dolby Vision. LG OLED displays are not that expensive these days.

I think they are that expensive. The cheapest OLEDs are around $1500, which is a lot of money for a lot of people.

Lets say you need an income of at least ~$30k to reasonably afford a $1000-2000 TV. I would argue that is a little low to afford a TV of that price, but at 30k that would be around a month's take-home pay. Doable I guess.

That's a tiny fraction of world population than can even possibly buy that TV, and only a fraction of those that can will. Even in rich countries, a large number of households wont have it. Dropping a grand+ on a TV would be considered a high-end luxury to the vast majority of the world's population.

Not sure what your point is or why you'd go on this tangent about who can or cannot afford an OLED TV.

My point is simply that OLED TVs are much less expensive than they used to be. Only 4-5 years ago you had to spend over $5,000 to get one.

The reason your confused is that your point is orthogonal to the discussion that was being had, but the other poster is still trying to have that discussion.

If you can't afford $30 then what is wrong with waiting until it's not $30.

The market norm for streaming new release HD rentals is more like $20, though.

Yes, and that for movies that were released in the theaters.

For a movie that were supposed to be in thousands of theaters having to release directly in streaming, 50% more than regular price seems ok.

What movies besides "Mulan" that were originally supposed to be in theaters but instead went straight to VOD due to COVID were more than $20?

the new Bill & Ted was $25, I believe

> Disney was able to charge _so much_ above the market norm for rentals

Were they though? There is a difference between trying and succeeding, and I haven’t seen any numbers suggesting that people actually rented it.

Completely anecdotally we’re quite happy with Disney plus which just opened in Denmark, we even bought the much cheaper year in the preorder, because well, small children. We would never dream of renting Mulan though.

> forecasts a future where streaming companies slowly increase their prices as bad as the cable television companies of yore.

Seems like this all has to do with how fungible consumers' preference for media is. If the viewers have to see the newest Disney film or the most recent season of a hit sitcom, then those who own the content can extract their pound of flesh. When a media property is strong enough that consumers demand it by name, it's a monopoly product with monopoly pricing power.

But if consumers show even a little flexibility, that puts drastic downward pressure on media prices. "We don't have This is Us... but we do have a very cheap back catalog of Grey's Anatomy that we think you might like just as much..." Now content becomes a commodity, and margins become razor thin. The surplus gets re-allocated and divided between cheaper consumer prices and those who own the algorithm. Netflix became the biggest media company in the world based on the strength of its algorithm not its media property.

One reason that cable company prices got out of control is because there was no effective mechanism for content fungibility. Higher prices were driven by ever higher carrier fees. If Comcast gets in a standoff with Bravo, it will always lose. A large segment of consumers demand Bravo, and Comcast had no way to deliver then any sort of satisfactory alternative. So carriers fees marches higher, which then in turn meant that consumer prices marched higher, since the cable companies were a monopoly themselves.

In the near-term the specific countours of the landscape and machinations of the business may push prices up or down. But in the long-run, algorithms are only getting better. There's no countervailing force making media branding stronger over time. The end-result has to be that the cost of media content asymptotically approaches its marginal cost: zero. Or more likely content just become a subsidized subsidiary of the tech gatekeepers that own the algorithms.

For most people, renting the film and buying a digital copy are effectively the same thing. Or do you honestly expect that your iTunes "purchases" will still be viewable in 5 years? I don't.

And yes, while $30 is expensive in comparison to other companies' rental prices, I remember that many new movies (e.g. Deadpool 2) are at first only available for sale on iTunes and only later do they add rental options. Plus, for movie fanatics - who tend to be main buyers in the first 1-2 weeks, Disney is not competing with online rentals, they are competing with 4K Blu-Ray.

So if they can provide an experience that lets me watch a movie at 4K with HDR and a decent bitrate on my offline TV, I'm in at $30.

I feel like Tenet is seriously screwing up here. I'd love to see the film and I'm OK with paying $30 for the whole family. But Cinemas are closed, there are no streaming options, and they don't even have a Blu-Ray release date yet.

With that in mind, I'm not surprised that some of my friends have opted to watch a low-quality illegal cam recording of it, instead of waiting 5+ months. Warner Brothers could have monetized that impatience, but they screwed up. Let's hope Disney will do better by offering paid legal downloads on day 1, even if it's as expensive as cinema used to be.

And if you don't believe that impatient movie fanatics are a market, consider this:

https://www.cinemablend.com/new/New-System-Allows-You-To-Str...

https://www.dailymail.co.uk/sciencetech/article-3464839/The-...

Well, if they bring out tenet on digital then soon you will be able to download a high-quality copy of it. That's why $30, it subsidises all the illegal downloads.

> Or do you honestly expect that your iTunes "purchases" will still be viewable in 5 years? I don't.

It's never a continued guarantee, but all the DRM'ed stuff (movies, songs) I bought on the iTunes Music Store in 2009 are still playable today.

> Or do you honestly expect that your iTunes "purchases" will still be viewable in 5 years

Well, mine from 5 years ago still are viewable.

However, I cannot play my old Bruce Springsteen albums (records) because I don't have a record player anymore.

I also can't play my cassette tape of 38 special because I don't have a cassette player anymore.

I also can't play any CDs (unless I'm in my car), because I don't have a CD player at home.

And finally, I can't play DVDs anymore because I don't have a DVD player anymore.

Technology marches on. I've bought and rebought multiple media versions of the same thing due to changes in technology: cassettes, records, CDs; Betamax, VHS, DVD's.

Your argument is tired and irrelevant because technology will obsolete it one way or another.

And if you really do like watching crappy old VHS on your new 75" 4K tv, then god bless you, because that would make my eyes bleed. (Seriously, if you do, then none of my comment should apply to you, because you are keeping the flame of old tech alive, and my props to you.)

Side note about technology - I have old 3.5" hard drives that just aren't worth keeping around too, and are too hard to securely erase, so I destroy them physically. (I just tried to securely erase an old 50GB external spinning disk two weeks ago and it was painful. I decided a ball peen hammer was a better approach.)

I can't play any CDs because I don't have a CD player at home, however, at some point many, many years ago I ripped all the CDs I had to FLAC and so I'll have access to my music collection as long as I live, no matter how technology (or the wishes of record companies) changes, and even after my death my kids should be able to freely access my collection if they would want to, just as I have listened to vinyl records that my grandparents had.

That is what a purchase means, it's supposed to be permanent, not subject to anyone's decisions on whether that music should remain available or whether it's worth to re-issue it in a new format. I would not be able to re-buy some of that music even if I wanted to (weird local bands that are not available anywhere now), but there's no reason why I should have to - digital data does not degrade, so a single copy should be sufficient forever.

Disney wasn't the first to do that. A number of new movies have come out at that price point for a very short window this year before becoming available for purchase or rental. I don't think it's accurate to compare these movies to rentals in the $2-5 range. This scheme is clearly designed to replace some of the revenue from a theater run before it goes straight to rental. If you're looking at it that way, it's not such a bad deal for the consumer. We did the Mulan thing and it was half what it would have cost to take the family to the theater. It was a fun evening at our house and we would do it again as an alternative to going to theaters during covid. The only ones getting screwed by this setup are the theaters.

I think that Netflix (as an example, but also most streaming services -- even HBO max at this point) are aggregators though. Disney can afford to charge this premium because their content is so differentiated. For aggregators with commoditized content, it will always be a race to the bottom for pricing to reach maximum users and spread the high fixed cost of content across them.

I would look to other content providers rather than other streaming services to anticipate who might follow Disney's pricing model. And even though this was probably just a strategy they took to deal with the circumstances created by COVID, if it works, they may stick with it. I could see theater and early access on Disney+ being released at the same time, and you can choose to go spend $30 at the movie theater or $30 in the comfort of your home.

What is old is new again.

Anti trust broke up the studios owning movie theaters in the Paramount Decree of 1948[1]. BTW that decree was repealed this year.[2]

So now the studios once again own their delivery system – which is the in home theater.

[1] https://en.wikipedia.org/wiki/United_States_v._Paramount_Pic....

[2] https://www.polygon.com/2020/8/7/21358637/movie-theater-anti...

While the whole of Disney has now morphed itself into an Integrator in the past 6 years or so, there are parts like ESPN and Hulu that function as Aggregators and have to curate the content from elsewhere. In these business lines they have less of an ability to extract the 100% margin like Disney+. They’re dependent on NFL, NBA for the rights, and on Hulu for other studios to sell them the rights to stream the movies and shows. They attempted something closer to integrator approach at ESPN with X-Games but its scale dwarfed in comparison. I do like that Disney is moving ahead and integrating and building better content. It took them a lot of acquisitions and strategic planning to get here. When I worked there, it was a really hard sell to bring this streaming expertise in-house. I was relatively junior employee and didn’t realize that a company like Disney can just buy the best streaming platform that they’d been using, MLBAM and build their streaming technology around it.

It is pretty easy with Amazon Prime or Apple TV to cycle through streaming services or pay channels often with free or cheap specials.

That is my current plan, no more than two paid subscriptions at any time with Amazon Prime being one of them. However, 12+ mos ago we canceled Netflix with the intention of signing up for a HBO product for awhile. That was the plan anyway. We haven't yet signed up for a second service.

It helps that whenever the kids are home we binge on whatever during the holidays because they have "shared" accounts with almost all services.

edit-to-add: we have basic cable because bundling it with internet saves us a dollar.

Why we don't have a way to federalize content generation and allow content to be distributed organically. Similar to what is happening with Podcasts. Is there any video podcast kind of format that you can subscribe to their RSS and get the video to be played in any platform that supports it?

Frankly if you want convenience in this day and age you have to turn to piracy.

Isn't the fundamental issue that aggregators are able to pick the "best" parts they want while the integrators are forced to produce the best all the time?

Wikipedia was a boon for search, as it provides so much value for Google to show direct answers and results. But Google didn't do much for it.

Netflix and Amazon Prime has shown that content can be produced for relatively unknown "brands" and still be highly valuable. Disney is traditionally the owner of intellectual property that they want too monetize.

Doesn't take a genius to understand that at some point Disneys content will be sup-bar what others are offering. Even when they today have a head start.

I have no issue to think about a world where kids will grow up without ever touching Disney content. But some form of Netflix they will for sure have.

Why would Disney suddenly be bad at making popular content? Disney has been wildly successful for to get than Amazon and Netflix and HBO combined.

Doesn't history tell us how hard it is to adjust to a changing environment?

I am just betting that at a time in the future Disney will not be as relevant as they are today. And I would argue they already suffered over the last years. With less and less people aiming towards blockbusters in general.

Sure maybe they stay afloat but assuming they will constantly produce high quality and that no one is able to overtake them by a bigger margin is not what I experienced over my lifetime.

I'm not sure I totally agree with this. Disney is incredibly talented at telling stories with a long shelf life (both singular stories and franchises). This is a core competency that isn't exactly disrupted by a change in the content distribution model. Not to say it can't happen, but they have been able to execute well on that competency since the 1920s.

This streaming shift also is beneficial to Disney, with more touch points to access their audience and extract value - unconstrained by TV/theater time constraints and middlemen.

I don't know how you support that they suffered over the last years. The Marvel Cinematic Universe has crushed it, Disney Plus has more subscribers than expected (thanks in part to COVID), and many DTC purchases on Disney Plus have been successful. Not to mention this content success begets success in other parts of the business.

> Doesn't take a genius to understand that at some point Disneys content will be sup-bar what others are offering. Even when they today have a head start.

I think Disney's whole business model is built around insuring that never happens, both by hiring the best people and by buying any company that demonstrates a threat to their hegemony.

Have you seen the remakes? Mulan and The Lion King live action remakes were insulting to the originals despite having the budget for the best. Somehow they still made money hands over fist....

> Somehow they still made money hands over fist

It looks like they took a bath on Mulan; $66.8 million box on a $200 million budget.

But the integration may work out for them in the long run if people who signed up for Disney+ keep their accounts.

problem with aggregators (google/Facebook) is three fold.

Yes, you bring your content to them, but you also give your competitor all your data. And you pay them to do this buy giving them 30%+ off the top. I dont think these huge cuts are sustainable business models long term, and content creators will seek to 'start their own platforms'.

Lastly is censorship. You say corona virus or marijuana in your youtube video and you just lost your business in some cases. who wants to have a business like that? content providers bring their hard work to youtube and have a gun to their heads the entire time.

Huh, companies like Disney would anyway heavily self-censor the content they produce. I mean it is Disney's prerogative to produce cliched pap most of the time. To think Big media's content will be censored by aggregators, however, is hilarious.

you are not listening. I specifically called out Google and Facebook.

it doesn't matter what Disney does. The top tech 'aggregators' huge cut makes it impossible to run a business long term because you are losing 30% off the top line and giving up all the data (often not even being able to see what your own users are doing). so DIS can kick you in the jewels and it doesn't matter, because in the long run the likes of Google destroys its content creators.

As content providers get successful, they either move to another platform or go the DIS route - start their own. The fact that patrion had to exist for content producers to justify their existence is a shame on google.

I wonder at what point integrators' target market becomes too broad. Both Disney and Netflix have this problem: some of their content appeals to me, maybe enough for me to purchase a subscription to the platform, but a lot of it doesn't. People who sign up for free trials to access one show aside, this will lead to a point where multiple integrators (let's say streaming services to continue the example) each have one or two offerings I'm interested in but each is asking a $5-10 a month fee for it.

The decision then becomes whether I'm willing to pay $5-10 for one or two shows (and not for everything a service offers, since their offering has become too broad) or whether I will choose to not watch at all/pirate.

Why does it matter if there is stuff you don't like, as long as there is enough stuff you do?

I believe GP is saying that they aren't willing to pay $5/10 a month for one or two shows. Especially not in a world where their ideal preference is one or two shows from integrator A, one or two from integrator B, from integrator C, etc... It can get very expensive very quickly.

Disney offers 7 separate username/passwords for one paid account. Not counting that people can share a username.

There's 7 profiles per account, but only one email/password. They also allow "only" 4 active streams at a time.

Disney attacks this problem by partitioning its production infrastructure.

Good idea that has mature themes that won't look right under the Disney logo? There's Fox 2000 pictures or Lucasfilm or Searchlight. It's all the same company, but with different labels to make it easier for the consumer to guess at the "flavor" of product they'll get.

The "pirate" option is interesting. 10 years ago it used to be a matter of ease of use. Torrents and Plex offered something that no other company at the time did. Since Netflix and others came on the scene now its just because people don't want to pay.

I signed up to NowTV in the UK to watch Game of Thrones for 2-3 months and cancelled. The great thing about many of these services is the come and go subscription. Why not sign up for a few months, watch all the content you like and then cancel when you're done?

So if I understand this correctly, Youtube would be an aggregator and Netflix would be an integrator by the definitions given?

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