Disney’s $52bn acquisition of 21st Century Fox assets may have caused some causal observers to be surprised.
However, if you have been following Disney closely for the last few years, it will be more apparent that this move was a fundamental part of the plan to avoid being disrupted by Netflix.
In order to stave off the type of disruption that Netflix inflicted on Blockbuster, Disney has had to execute a multi year plan, that is now beginning to take shape.
The result is an approach that at the very least provides a template for how to execute a digital transformation strategy in the face of competition.
Investing in the Tech Through Acquisition
Through the success of Netflix, it has long been acknowledged that digital streaming will have a profound impact on how consumers find and watch video content.
However, when Netflix started investing in buying and producing its own content, rather than just distributing content, it turned its content suppliers, including Disney and Fox, into competitors.
Therefore in order to prevent Disney from becoming obsolete, or at the very least, a heavily commoditised part of the value chain, Disney invested in technology that allowed it integrate vertically, just as Netflix laddered up by producing its own content.
This is something that Disney theoretically could have done by building the technology in-house. However, it opted to invest in BAM-tech, a sports video streaming technology on a multiyear basis, ultimately becoming majority owner in August 2017.
Not only did this approach allow Disney to save time, but it also enabled the business to acquire significant domain expertise, as BAMtech arguably has the best streaming technology of any organisation not named Netflix.
However, while it gave Disney the technical backbone needed to create a Netflix competitor, there is more to a streaming service than just the technology.
Understand the New Value Proposition
While the end result of consumers watching content is the same, doing this via a streaming platform, instead of through a cable operator means a necessary change in how Disney views its value proposition.
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