Disney Headlines for December 16th, 2021
The Walt Disney Company has suffered through a tumultuous week due to some pragmatic but awkward business decisions.
Somehow, the company managed to tick off China, American politicians, AND Google during the same week.
I’ll explain in this week’s Disney Headlines.
Disney Deletes a Simpsons Episode
I try hard not to talk about The Simpsons all the time, but please believe me when I say that I could.
My wife and I can have entire conversations using nothing but Simpsons quotes. We’re also Disney trivia masters, which is why I can tell you this fact.
Over the years, Disney has only pulled a handful of episodes out of its rotations, most notably the Michael Jackson one, Stark Raving Dad.
If you pull up Disney+ today, you’ll notice that the season premiere shows as Mr. Lisa Goes to Washington instead.
Disney has banished Stark Raving Dad from existence. But, even before that, something similar happened with The City of New York vs. Homer Simpson.
In that memorable episode, Homer travels to New York City, only to suffer numerous mishaps. At one point, two people argue across the Twin Towers.
After 9/11, that segment felt tasteless. So, Fox dropped it from syndication. It only returned to the rotation once we had plenty of distance from 9/11.
Remember that Fox still owned The Simpsons at the time. During Disney’s stewardship, most of its controversies have involved little things like frame rates…until now.
As previously discussed, Disney+ recently entered several international markets, many of them in Asia, including Hong Kong.
The Chinese government took an interest in the content and demanded that Disney pull one Simpsons episode.
In Goo Goo Gai Pan, Marge’s sister, Selma, travels to China to adopt a child. Naturally, the Simpsons follow along because it’s what they do.
The Simpsons makes several jokes about China during the trip, including references to Tiananmen Square. The government didn’t want that to play.
Disney quietly removed the episode, only for people to notice later. So now, the company’s in an awkward situation.
Disney’s Growing China Problem
Jamie Dimon, the CEO of JPMorgan Chase, would make any list of the most powerful bankers in the world.
Last week, he joked that his company would outlast the Communist Party. Then, a man with a net worth of $2 billion backed down in 24 hours, recanting the statement.
I mention this to stress the struggles North American companies face in dealing with China. They want to sell their products to more than a billion potential customers.
Unfortunately, the Chinese government requires plenty of pandering before it agrees to any outside interests selling in the country.
Disney has faced this problem repeatedly in 2021. Films like Raya and the Last Dragon, Shang-Chi and the Legend of the Ten Rings, Eternals, and Black Widow didn’t play in China.
The reasons why run the gamut. The star of Shang-Chi and the director of Eternals made comments that the Chinese government didn’t like.
The timing of Black Widow placed it in competition with several Chinese releases during an anniversary celebration of the Communist party.
At this point, Disney’s thankful that they can sell Disney+ in the region after all these recent setbacks. That’s why the company played ball, so to speak.
Frustratingly, that’s angered American politicians. They don’t want recognizable corporations capitulating to unreasonable quests from Chinese officials.
Disney really can’t win here. So their best hope at the moment is to stay off the radar and hope that some other corporation gets in trouble instead.
Alas, that’s not Disney’s only battle right now.
An Unexpected Email
I chronicle streaming media in my podcast, Streaming into the Void. Over the weekend, I was happy to tie off a story about YouTube TV and Roku.
For several months, Google had threatened to remove YouTube TV and possibly even YouTube from Rokus.
The company tried to strongarm Roku into giving it better terms than other streaming services.
We still don’t know who won, but the two parties quietly settled the matter in time for Christmas, a crucial period for Roku.
Well, YouTube TV stayed out of the fray for about, oh, 96 hours before starting up again.
Earlier today, Google informed customers, including me, that it would pull all Disney programming from its service on Friday, December 17th.
Carriage agreements continue to cause nightmarish problems for legacy companies. Organizations like Disney always expect rates to go up.
YouTube TV embodies the modern equivalent of a cable channel thanks to something called a skinny bundle.
People pay a set fee each month to have access to 85+ channels. By my count, Disney owns up to 17 of those channels.
So, these negotiations represent 20 percent of YouTube TV’s programming, including ESPN, the Disney Channel, and ABC (!).
Yes, Disney may very well pull ABC if the two sides cannot come to an agreement.
In that scenario, Google has already announced it will reduce the price of YouTube TV by $15 per customer.
That statement alone tells you how lucrative carriage fees remain to Disney. As such, I expect the parties to reach a compromise, possibly by the time you read this.
Still, Disney officials simply cannot be getting into slap fights with companies as powerful as Google.
There’s just no way to win that war, and Google knows it.
Disney’s Streaming Budget
In a strange way, this headline ties into the previous one. Given the above dispute, you can understand why Disney desires vertical integration.
That’s a business model wherein a company owns all phases of production. Right now, Disney doesn’t distribute its movie and TV content.
Instead, movie theaters screen Disney films. Meanwhile, even when Disney owns network and cable channels, it still needs cable carriers to show them.
With Disney+, the conversation changes. Thanks to this streaming service, Disney owns the means of distribution as well.
That’s why the company has committed its future to Disney+. To wit, Disney CEO Box Chapek suggested that his company will spend $33 billion on content in 2022!
The Motley Fool adds that this amount totals more than what Netflix (!) will likely pay for its 2022 content.
In 2021, Netflix’s content spending has cost $17 billion. So, even a sizeable increase wouldn’t match that total.
Now, Disney had already committed to many of those expenses due to ESPN and ABC contracts in place.
Still, Disney’s streaming services have roughly doubled their previously projected 2022 expenses. That shows you how serious Disney is about the streaming wars.
The company needs to take that approach as well. With more power in the medium, it won’t need to cater to the wishes of China or YouTube or anybody else.