Revisiting My Predictions for Hulu and Disney Plus
Why the futures of Hulu and Disney+ rely on the tricky politics of Disney unifying their back-ends (from Newsletter #192)
The Information just reported on how "Hulu’s engineers have resisted being absorbed into Disney's tech team". I predicted and wrote about this exact problem for Hulu and Disney Plus back in February, back in Newsletter #192.
I am making the download of Newsletter #192 free. Click here to download it for free.
Outline of Newsletter #192 about Hulu and Disney Plus engineers
I thought through two very different technical futures for Disney+ and Hulu, and how they reflected an existential choice for Disney's streaming business: Future #1: ESPN+ and Disney+ continue to be built off of BAMTech, and Hulu remains separate as a back-end, or Future #2: Disney makes an Occam's razor decision, believes it is easier to have one back-end, and shifts all streaming businesses to either BAMTech or Hulu's back-end.
I used three lenses to think through how Disney tackles this existential choice:
Churn is an important factor for this existential decision Disney will make for its streaming business, and the one with the least amount of available evidence.
Disney's choice about BAMTech versus Hulu back-end is a choice about the extent to which Disney wants to be an AI-driven streaming business.
Disney's choice about BAMTech versus Hulu back-end involves some ugly financials and, as Hulu CEO Randy Freer's departure implies, some ugly politics, too
I concluded with a (now accurate) prediction of the ugly politics in The Information piece:
Mayer faces a tough road ahead: he needs to keep two entirely different groups of managers and engineering teams focused on the same goal, even though their objectives are different; he needs to be able to communicate to consumers the Disney, ESPN, and Hulu value propositions in the best possible way that maximizes engagement and growth, and reduces churn services; and, he needs to convince investors that whichever choice he makes is the best choice for scaling streaming going forward. The unhappy managers, unhappy consumers, and unhappy investors that navigating this choice is inevitably going to create for Mayer is going to result in some ugly internal and external politics for Disney over the next 24 months.
What has happened with Hulu since February
Obviously, my conclusion was Kevin Mayer-focused, so whatever learning curve he was on is less steep than the one Rebecca Campbell is on, now, with Hulu and Disney+. Campbell is arguably on the same learning curve, but hers is steeper given she was not involved in the original mergers or strategy, and does not come from a background which operationally involves streaming. [NOTE: I also wrote about evidence pointing to a self-reinforcing Disney+ and theatrical "flywheel" Mayer seemed to have built, which I think is likely dead post-COVID]
Since I wrote Newsletter #192, what is interesting in The Information piece is this paragraph:
[Unifying Disney’s streaming technology] poses technological complications of its own, which have caused Disney executives to hesitate on making the switch. Parts of Hulu’s technology are highly regarded—in particular, how it serves ads on the service, which isn’t a core strength of Disney’s main streaming-tech group. The hesitation also reflects a belief among executives that the integration could take up to two years, delaying other plans in the meantime, former executives said.
This is the same question that I dove into in February: churn is an existential question for both Hulu and Disney Plus, and it is a probable outcome of slow or problematic unification of the two services. I think this piece now suggests that churn is an afterthought for managers who have the objective of figuring out how to get the teams, and tech, synchronized and harmoniously working together.
Postscript on Hulu's AI-driven, personalized User Interface/User Experience
Last, it is also worth highlighting how, then, I thought Hulu's AI-driven, personalized User Interface/User Experience was its most valuable asset. But, here we learn Hulu's back-end is valued less for its personalization and AI, but rather more for its ad delivery and targeting... which are lower priorities for Disney in streaming].
I had argued then that Disney should unify on top of Hulu "because I think Netflix, Apple and even Hulu have made AI fundamental to scalable streaming user experiences. " But, I did not know then that "In 2017, Hulu hired BAMTech to provide part of the technology for its streaming cable offering, Hulu + Live TV."
I also predicted that "I think the politics inside and outside about that decision stand to be ugly, because this is a choice that Disney, as a legacy media company, is not built to make."
I think Disney+ has scaled extraordinarily without original content or much of a personalized experience. It may not ever need one. That said, if they go the route of a unified service, there is a complex and difficult question of whether simplification will come at the cost of engagement.
***Updated***
Good response from reader Salil Dalvi as to just how hard integrating these two platforms can be:
Not an info sub. SO hard to integrate different platforms for REAL reasons. Adtech, subscriber management systems, data/analytics management, offer management, distribution, platform deals, vendors, etc etc. mashing together complex systems/ biz processes for each is crazy hard.
— Salil Dalvi (@sd_so) June 10, 2020