Disney Feels The Heat As Children Lead The Cord Cutting Revolution

from the adapt-or-perish dept

Fri, Jul 7th 2017 6:25am — Karl Bode

For a while now we've noted that it's actually the youngest among us that are leading the cord cutting revolution. Viacom has watched channels like Nickelodeon experience a ratings free fall for several years now as streaming alternatives have emerged as a useful alternative to strictly-scheduled, commercial-bloated Saturday morning cartoons. Toddlers don't really care if they're watching the latest and greatest "True Detective" episode or not, and parents, like everybody else, are tired of paying for bloated cable bundles filled with channels they never watch.

Like Viacom, Disney has been feeling the brunt of this evolution, especially since cable TV accounted for 30% of its revenue and 43% of profits last fiscal year. But, as evident by the ongoing subscriber exodus at Disney-owned ESPN, the company really hasn't really done a very good job adapting to the changing market. The same thing is occurring at Disney's kid-oriented networks like the Disney Channel, Disney Jr., and Disney XD, all of which are, well, not faring particularly well under this new streaming paradigm:

"For the first six months of this year, the commercial-free Disney Channel's ratings among in its core 2-11 and 6-14 demographics fell 23% in prime time and 13% and 18%, respectively, during the full day, compared with the same period a year ago. Ratings are also down at the smaller Disney Jr. and Disney XD networks, which fall under Mr. Marsh's Disney Channel umbrella.

Cable revenue at Disney is relatively flat, and operating income is down 6% in the first half of the current fiscal year. That has contributed to a freak out or two among Wall Street analysts, which have in recent months finally, truly woken up to a trend they spent years both ridiculing and denying. That's in large part thanks to the fact that 2016's 1.7% decline in traditional cable TV viewers was the biggest cord cutting acceleration on record. The second quarter is expected to be notably worse, with most analysts predicting a 1 million subscriber decline (or greater).

And that fear on Wall Street has, in turn, forced traditionally myopic cable executives to finally realize that they need to stop trying to defend the traditional bloated cable TV cash cow -- and begin offering cheaper, more flexible streaming alternatives:

"Disney Chief Executive Robert Iger has said that strengthening online accessibility for television programs is a priority and that the company is preparing to offer its channels, in part or whole, directly to consumers online rather than just through costly cable packages. Profits for Disney Channel and Freeform are driven in part by long-term contracts with cable companies, but the erosion in ratings is likely to ultimately hit the bottom line unless the networks can generate substantial new digital revenue."

Of course, like the Millennials ahead of them, most of these kids will grow up (correctly) believing its bizarre and punitive to force people to buy oodles of often-horrible cable TV channels at outrageous prices. And contrary to some cable and broadcast executives who still think this is all just a temporary blip on a radar screen, this rise in competition and the resulting massive shift toward cheaper, more flexible viewing options isn't going anywhere.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: cord cutting, streaming
Companies: disney

29 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Ninja (profile), 7 Jul 2017 @ 6:08am

Disney does produce good content here and there but they managed to earn my disdain because of their past copyright shenanigans. And there was plenty of warning so they could change their game to suit their customers. Can't say I'm sorry.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 6:33am

Of course, like the Millennials ahead of them, most of these kids will grow up (correctly) believing its bizarre and punitive to force people to buy oodles of often-horrible cable TV channels at outrageous prices.

And they will consider that its is even more bizarre to organize you viewing and and social life around a schedule determined by the corporations.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 6:40am

I can almost feel Disney and others having a brainstorm meeting to think of reason(s) as to why people are leaving and then coming out saying that people are leaving because its down to piracy where the people are getting the media for free rather then for any reason of that people are leaving due to increase pricing or lack of availability of content on the site.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 6:44am

Re:

And they will consider that its is even more bizarre to organize you viewing and and social life around a schedule determined by the corporations.

It was a bit of a miracle they could get kids to sit still for 30 minutes at the same time every day (with only 18-24 minutes of actual content).
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 6:51am

Calling this a revolution kind of cheapens the term.
[ link to this | view in thread ]
PaulT (profile), 7 Jul 2017 @ 7:01am

A refreshing lack of panic, misdirection and demands that someone else prop up their business model here. Merely a recognition that the market is changing and that they need to increase digital profit to make up for the loss in traditional cable revenue. Could it be because they recognised that this was going to happen and made deals with Netflix and other avenues, so that the inevitable drop in traditional subscribers was mitigated?

Funny how the everything seems easier when you understand your market and can face the reality of the changes it faces over time.
[ link to this | view in thread ]
PaulT (profile), 7 Jul 2017 @ 7:04am

Re:
There are multiple definitions of the term, this seems to fit perfectly:

3.
a sudden, complete or marked change in something:

It's not as dramatic or important as a poltical revolution, but it does represent a complete change from the previous status quo and thus the term is apt.
[ link to this | view in thread ]
Hugh Jasohl (profile), 7 Jul 2017 @ 7:15am

I just hope Musk doesn't get taken over
We need the low latency always on satellite internet that his Spacex company will be launching on its reusable rockets. 2019 can't get here fast enough to finally break the stranglehold on Americas broadband state actor monopolies.
[ link to this | view in thread ]
Not an Electronic Rodent (profile), 7 Jul 2017 @ 7:28am

Re:

and then coming out saying that people are leaving because its down to piracy

Well of course! Piracy is the root-cause of terrorism too, isn't it?
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 7:33am

I can't see that if every channel supplier (eg. Disney, AMC, HBO, etc) goes direct to the consumer that the cost is going to really be that much cheaper than a cable package. You know that each supplier won't charge less than $5-10/month for their channels due to infrastructure and overhead. I think that the next gen "cable" will be some streaming aggregation site like Netflix, Sling, or others where you can buy an X-number channel package and then fill it up by clicking a checkbox next to that many channels.

The problem with moving to that model is the ISPs that are putting the caps on download amounts to keep people on cable.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 7:46am

"For the first six months of this year...fell 23% in prime time..."

Hard to believe that it fell that much "all of a sudden" and "For the first six months of this year". I think that they are stating the overall drop at once to "catch up" and further losses will seem small as they are dribbled out with the statement "see, we've contained the losses".
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 7:52am

Re:
The other problem is that the people on YouTube, Vidme, Vimeo etc. are becoming competitive with the TV companies, and with much much lower overheads, and an ability to attract and make a living from much smaller audiences. They do not even need a share of the platforms advertising income to make a living, but can rather rely on the likes of Patreon and KickStarter.
[ link to this | view in thread ]
tom (profile), 7 Jul 2017 @ 8:20am

One big problem with the current system is the splitting of programming across a family of channels. Program X is on Disney channel, Program Y is on Disney JR, Program Z is on Disney XD. The cables companies then set their tiers up so that the only way to get all the Disney channels is to buy the top tier. Same for ESPN.

If Disney and others really think this cord cutting trend is an aberration, they deserve to fail.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 8:32am

Re: I just hope Musk doesn't get taken over

We need the low latency always on satellite internet that his Spacex company will be launching on its reusable rockets.

Assuming the plans are any good. All forms of wireless data networks (cellular, satellite, fixed wireless) are generally considered "second-tier" services, to be used only when nothing else is available--due to restrictive caps and overage fees. If there were an unlimited plan for $50/month with good performance, other ISPs would be in trouble.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 8:58am

Re: Re: I just hope Musk doesn't get taken over
Also, while they can give a good bandwidth in low population density ares, they get very congested in high population areas like cities.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 9:01am

Re:
I doubt it's "overhead". The channels are charging $5-10/month because they want more money, or they want to be seen as "premium". Infrastructure can be outsourced ("the cloud"—or bittorrent), and a yearly subscription would work around payment overhead.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 9:09am

Re: Re: Re: I just hope Musk doesn't get taken over

Also, while they can give a good bandwidth in low population density ares, they get very congested in high population areas like cities.

Still, there are cell towers all over those areas. The bandwidth would be enough for many people to use as their main connections, if not for the punitive billing/throttling and everything else the telcos do to make their product undesirable.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 9:15am

Not "leading"
The children won't be leading this revolution, because cable TV will just be another thing about the past they don't understand—like a sibling hogging the home phone connection, or the idea of having to physically load an album to listen to one song. And parents won't be cutting the cord because of their children, because they didn't subscribe for their children in the first place.

Those children are never going to subscribe to cable, or even consider it, of course. But it will be another decade before they'll be old enough to have considered it.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 9:22am

Re: Re: Re: Re: I just hope Musk doesn't get taken over
The cell tower density solution does not work for satellites. beside which fiber to the home will always give better capacity per user than cell towers, as after all the towers are fiber to the tower, and then share it amongst all the users of that tower.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 9:55am

Re: Re: Re: Re: Re: I just hope Musk doesn't get taken over
Right, that's kind of the point. Satellite shouldn't be able to compete with anything on land, but the broadband market is so broken that people are going to try. Cellular providers refuse to provide decent service, fiber isn't likely to be widely deployed anytime soon, and so sending hundreds of rockets to space has become the "reasonable" option.
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 10:45am

What I thought people weren't really cutting the cord. That it's all a myth!!! I did for a number of years, and I would be NOW, but it's cheaper to get the dumb bundle with is Internet, Basic Cable TV I don't even have connected with their Basic box, and either HBO or Showtime. I picked HBO which I rarely have time to watch. I get my local TV channels still with a Antenna and use a TIVO with Tivo Mini's in my other rooms. I use the HBOGo app on my other devices. Comcast doesn't let HBOGo work on Tivo so I have to use a ROKU or AppleTV.

My brothers Kids mostly just watch Netflix and all the Kids programming they have. Which is a lot and always growing. In fact they are doing a lot of their own Original kids programs. They didn't know what a commercial was for the longest time as they only watch Netflix or a DVD or AppleTV. Not broadcast TV or any of them cable kids channels.

I even watch a lot of Youtube myself. There's a number of interesting channels I watch. I can watch them on my AppleTV. Or when I'm out at launch, I may watch some of it on my iPhone. Between what Tivo is recording and Netflix, once in a while Amazon Prime. Some Youtube. Plus I have most of my DVD's, HD DVD's and Blu-Ray's ripped and on my NAS so I can watch in any room in my house using PLEX. I really have to much content to watch. I couldn't imagine having 100+ cable channels also. I was talking to a girl at work and she was telling me she pays around $220 a month for cable and Internet and I guess home phone. I can't imagine paying that a month. I used to pay around $170 a month when I have cableTV and internet. That was like 8 years ago and my internet was the fraction of the speed I have now of 200Mbps.

Internet CAP's is all about protecting their TV business and nothing else. It's a huge scam. Costs keep dropping. Like I said, cheaper to sign up for a bundle then Internet only!!!
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 12:14pm

out_of_the_blue just hates it when Disney Feels The Heat
Stephen Kink's new novel: Children Of The Cord
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 1:05pm

My two year old can navigate Netflix with an XBox 360 controller. My 5 year old needs help finding cartoons with the Direct TV remote. Netflix is a win win for our family. The kids can watch whatever they want, I don't have to get off the couch to help.
[ link to this | view in thread ]
CHRoNo§§, 7 Jul 2017 @ 4:36pm

start making staruday and morning cartoons again
start making staruday and morning cartoons again

or die....

you decided against it as did others for reality tv..guess what...no one wants it

give me scoooby doo and fred flitnstone , he man and rockey robinhood in mornings and ill watch
[ link to this | view in thread ]
Anonymous Coward, 7 Jul 2017 @ 5:51pm

Disney once stopped a Frozen-themed singalong event in the UK which parents had already paid for, because copyright/performance rights something something.

I like to imagine that the fallout that parents suffered at the hands of their kids played some part in the anti-Disney backlash we're seeing worldwide. Asking a child not to sing one of the biggest bloody earworms of the past decade is like trying to put out a brushfire by pissing on it...
[ link to this | view in thread ]
Anonymous Coward, 8 Jul 2017 @ 3:48am

Mickey Mouse doesn't care; it still has its copyrights.
[ link to this | view in thread ]
Andy, 8 Jul 2017 @ 8:47am

Re:
Internet blocks are really working in the US luckily the rest of the world is moving more and more towards unlimited as it costs them nothing to offer it...not a penny more, when you have your broadband connection switched on there is a continuous stream of data to keep the connection active downloading or uploading only changes some of that data and does not cost a penny to do as it is done on your computer.

The only reason America is suffering is that there is absolutely no viable alternatives and that is being controlled by the big companies that feel a charge for noting is just clear profit for themselves.

It is the same with mobile phone charges where even if someone phones you you are charged for the call as well. Absolutely no reason for this to happen as american phone charges are the highest in the world and they are getting paid twice.
[ link to this | view in thread ]
Cowardly Lion, 10 Jul 2017 @ 4:43am

Re:
Well, it can't have helped their image any.

Disney tries so hard to tell the world they're just like Snow White, pure and innocent, with perfect hair and perky breasts, but the reality is they're this grotesque, black-hearted mouse with an over-sized ego.
[ link to this | view in thread ]
PRMan, 10 Jul 2017 @ 12:53pm

Re: Re: I just hope Musk doesn't get taken over
"If there were an unlimited plan for $50/month with good performance"

Expect to see something similar to this from Verizon and T-Mobile on their 5G "home wireless" plans.

At least Verizon intends to compete strongly with cable for internet service.
[ link to this | view in thread ]