In Q1 2023, PARQOR will be focusing on four trends. This essay focuses on "Media companies have millions of consumer credit cards on file. What happens next?” 

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I argued on Monday that Disney CEO Robert Iger’s rethink of “general entertainment” effectively asks: “Why are we spending billions to compete with and lose share to free services with a similar value proposition?” I think Iger was framing Disney’s streaming value proposition as:

• [Value Proposition of Content Library] = [Owned IP] + [Licensed IP]  

In Iger’s framing, the value of Owned IP to a legacy media streaming business is greater than the value of Licensed IP. There are two problems with this framing. 

The obvious one is that Iger is complaining about the economics of distributing “undifferentiated” licensed IP. But the economics of licensing IP for *subscription streaming models* are inferior to the economics of licensing IP for *Free ad-supported TV services* (FASTs). For example, Pluto TV only pays a variable share of ad revenues for Licensed IP, whereas Disney+ licenses content with a fixed fee per play based on rate cards and a variety of other variables.

The less obvious problem is that the software-related variables of user experience (UX) and user interface (UI) should also be reflected in this “equation”. The UI consists of all visual elements of a streaming service (e.g., fonts, colors, layout) and the UX is the user-friendliness of using the service, and what the user sees and feels while using the application. 

Key Takeaway

Disney’s streaming businesses are not only competing with other content libraries. They are also competing with the UIs and UXs of other software that leverages licensed IP more cost-effectively.

Total words: 1,900

Total time reading: 8 minutes