Disney says its television future is with direct-to-consumer apps like Hulu. It is starting move content tied to pay TV over to Hulu in support of that strategic shift. Does this mean the TV Everywhere has outlived its usefulness?
Disney said today that it would close the FX+ subscription service on August 21st, 2019. FX+ is available to pay TV subscribers for $5.99 a month and allows them to watch recent episodes of FX shows like Snowfall and Pose without ads. Current subscribers can continue to access the service through August 20th and don’t need to cancel as their pay TV operator will stop billing them. FX and FX+ came to Disney as part of the Fox acquisition, which closed in March of this year.
FX+ closure makes sense for Disney
The decision to close the service is part of Disney’s grand strategy realignment behind its primary online services Hulu, Disney+, and ESPN+. FX content is too edgy for Disney+ and will find a new potentially ad-free home on the Disney controlled Hulu service. FX content can still be enjoyed with ads using the TV Everywhere authenticated FoxNOW app and through FXNetworks.com. However, if FX show fans want to watch ad-free, the only place to do it is by subscribing to Hulu with the ad-free option for $11.99 a month.
It is doubtful FX+ attracted many subscribers. FX CEO John Landgraf has much higher hopes of the distribution through Hulu, as he said at an upfront press briefing in May:
“I think the possibilities of a platform like Hulu are much more exciting to us in the long run than trying to scale up a stand-alone version. That FX programming will now be on a quite widely distributed streaming system with an ad-free option, it expands the dimensions and what we can do.”
Hulu has 28 million subscribers and is growing fast. It added 8 million subscribers between April 2018 and May 2019, an increase of 40%.
The decision to support Hulu, not pay TV, an easy one
The decision to switch FX+ away from supporting distribution through pay TV to bolstering the position of Hulu must have been an easy one for Disney. Bob Iger, Disney’s CEO, has been very clear that he views online distribution the primary focus of the company. Before Disney assumed a controlling interest in Hulu, Mr. Iger said:
“Given the success of Hulu so far in terms of subscriber growth and the
relative brand strength and other things too like demographics, we think there’s an opportunity to increase investment in Hulu notably on the programming side.”
Simply put, Disney thinks FX content in Hulu is a better long-term investment than FX+ at $5.99 a month tied to cable. The company is likely carefully reviewing other online efforts with pay TV.
TV Everywhere strategy under the microscope
Comcast and Time Warner announced the TV Everywhere (TVE) strategy in 2009. The core idea was to bolster the value customers received from their pay TV subscription. Pay TV companies didn’t charge for TVE-powered multi-screen access, and content providers likely didn’t receive much in the way of higher license fees for it either. However, that didn’t matter because it preserved the enormous value of the pay TV industry, from which operators and content providers benefited greatly.
Ten years on and the co-dependence of pay TV and content providers is beginning to unwind. Providers like Disney and TimeWarner are pinning their futures on direct-to-consumer apps like Disney+ and HBO Max. Both companies are readying new TV shows for their services which would previously have been destined for cable channels. And who can blame them when digital competitors like Netflix receive 40 million views in the first weekend of release season three of the hugely successful Stranger Things franchise.
In this environment, how do Disney and WarnerMedia view the TVE powered Disney NOW and Watch TNT? In 18 months or so, if Disney+ and HBO Max are big successes, they might decide that moving the TVE content and approach into their DTC offerings is a better long-term investment.
Why it matters
Disney has made it clear its television future lies with the direct-to-consumer (DTC) apps Disney+, Hulu, and ESPN+.
It has started to move television assets currently tied to pay TV over to DTC.
Expect Disney and other content providers to re-evaluate the usefulness of other pay TV efforts, like TV Everywhere, as their DTC efforts grow more successful.