2019 will see the release of Disney+, the streaming service that Disney (NYSE:DIS) hopes will be a Netflix killer. It will be a trial by fire for Disney, which has far less experience in the streaming world than its more established target does. But Disney is not totally without a streaming pedigree -- it has recently met with some success in the form of ESPN+. Disney's sports streaming service is not on the same scale as Disney+ will be, but we can still learn a few things from Disney's efforts.
What Disney has achieved with ESPN+
When ESPN+ launched back in April, the service seemed conservative in some ways. Disney's ESPN family of channels had long been an appealing candidate for a direct-to-consumer model, but ESPN+ does not include an ESPN live-stream. Instead, the service features select live content and a catalog of on-demand content that includes ESPN's popular 30 for 30 series.
Despite its limitations, ESPN+ has been relatively successful. Disney CEO Bob Iger said in this month's quarterly earnings call that the service now has 2 million subscribers, double the number it boasted when Disney last shared figures five months earlier.
Check out all our earnings call transcripts.
That's a far cry from Netflix's 139 million subscribers worldwide, but it shows that Disney is capable of growing a subscriber base. Growth of 2 million subscribers in less than a year is extremely impressive. For comparison, CBS Corporation's CBS All Access hit 2.5 million subscribers in 2018 after more than three years on the market. Disney's effective use of its existing ESPN audience and smart content licensing decisions are among the reasons for its success with ESPN+ subscriber growth.
Those are things that the company should be able to replicate with Disney+. After all, ESPN is not Disney's only channel with an existing audience, and Disney will certainly license at least some content to bulk out its offerings beyond its own (extensive) collection of movies and TV shows.
ESPN+'s subscriber growth is good news for Disney, but it's not the only reason for optimism. It's also important to consider how well ESPN+'s streaming infrastructure has held up to these higher numbers of streamers.
Streaming technology and ESPN+
A streaming service is only as good as its underlying technology, and there aren't that many reliable streaming companies to turn to. One of them is BAMTech Media, which is now a Disney subsidiary.
BAMTech media was spun off of another reliable streaming tech company, MLB Advanced Media, which provides the streaming architecture that powers more than just Major League Baseball's MLB.TV. It's also behind NHL.TV and, at various points, HBO NOW, WWE Network, and Disney's own WatchESPN). Disney began as a minority owner of BAMTech, but it bought a controlling stake in 2017. Now, Disney's streaming future hinges on BAMTech.
And, so far, ESPN+ has made BAMTech look pretty good. To be sure, 2 million subscribers don't represent the same level of strain as, say, the more than 25 million viewers who crushed HBO's streaming infrastructure during the Game of Thrones season seven premiere. Still, 2 million is 2 million, and ESPN+ has also proven itself to be competent with live-streaming events by avoiding high-profile failures.
Live events are tougher to stream as viewers tune in all at once and limited buffering means limited margin for error. Since connection speeds are always fluctuating, video streaming services "buffer" -- download a bit of content ahead of the viewer -- so that they can pick up the slack when streaming speeds lag. But, of course, you can't buffer content that hasn't taken place yet, which limits this safety net for live-streaming. But live events like UFC Fight Night -- a major driver of ESPN+'s subscriber surge, according to Disney CEO Bob Iger -- have, by and large, gone off without incident.
Disney+ and a big year for streaming
Disney has proven that it can grow a subscriber base, and BAMTech Media has impressed so far. Those are good reasons to be cautiously optimistic -- but cautious we should remain, as this good news comes from a service that is operating at a fraction of the scale that Disney hopes Disney+ will reach. The major battles of the upcoming streaming wars between Disney, Netflix, and others still remain to be fought.