Why the new DTC approach?
The growing demand for video streaming services in the US has led to a decline in video subscribers for most cable and satellite operators. Many viewers now prefer watching TV shows on smart devices. This change in viewing activity is also hurting Disney’s (DIS) business. To counter these threats, the leading media giant has launched its new DTC (direct-to-consumer) service.
In April 2018, the company launched its new sports app called ESPN+, which offers more than 10,000 live sporting events including college sports. The new app, which costs just $5 per month, has become quite popular. In a span of five months, it has gotten over a million subscribers.
Acquisition of Fox to add value to its DTC goal
The company also has plans to launch another app in 2019 that will offer Disney movies and TV programs to its subscribers. Thus, the acquisition of Fox (FOXA) assets may help the media giant boost its intellectual property portfolio and strengthen its foothold in different markets where Fox channels are available.
Fox Networks Group International’s 350 channels attract viewers in 170 countries. Its Star network is dominant in the highly populated Indian market where Netflix (NFLX) is aggressively targeting audiences with strong original content. The deal gives subscribers access to some hit movie franchises like X-Men, The Planet of the Apes, and the upcoming Avatar.
The acquisition of Fox assets and the rollout of its DTC strategy could certainly help Disney drive its media business. The graph above shows Disney’s media segment’s revenue growth in the last five quarters.
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