For better or for worse, Disney's (NYSE:DIS) Disney+ is all that tech investors and streaming video observers are talking about right now. Its massive launch has shown the marketing muscle of deep-pocketed Disney, and its launch-day glitches have reminded us just how difficult streaming video can be at scale. Disney+ already has a healthy user base, and its customers are streaming on all manner of devices, from smart TVs to smartphones. Among the platforms Disney+ is streaming on are Roku, Apple's Apple TV, and Alphabet's Android TV. Also in on the fun is Amazon's (NASDAQ:AMZN) Fire TV platform -- but that almost wasn't the case.
Just days before launch, Disney+ appeared poised to enter the scene without support for one of the two most popular home streaming platforms on the planet (Roku is the other). What was wrong -- and what changed?
All about advertising
So what was the nature of the disagreement between Disney and Amazon? According to The Wall Street Journal [paywall], it was all about advertising. Amazon wanted the right to sell advertising space on Disney's apps; Disney was, of course, against that.
Disney has promised that the Disney+ service will be ad-free, but that doesn't appear to be strictly true. And Disney and its various subsidiaries have a lot of different apps on Amazon's Fire TV platform, including the Freeform app and ESPN+, so discussion of advertising space on "Disney's apps" (plural) could involve any number of those. Amazon reportedly asks for percentages of advertisement inventory in discussions like these, so we're presumably not talking about Amazon creating new spaces for ads within Disney+.
Advertising space enables Amazon to monetize its very popular platform. Selling advertisements -- both on menus and home pages within Fire TV itself and, through Amazon's advertising platform, within apps running on Fire TV -- is a proven way to monetize streaming platforms like Fire TV and Roku.
A deal between new rivals
There's another variable here, of course. Amazon and Disney are now major streaming rivals. Amazon owns a subscription video on demand (SVOD) service as well as a marketplace for buying and renting digital copies of movies and TV shows. Disney, of course, owns Disney+; it also owns Hulu and ESPN+. Amazon uses its platform to surface Amazon-backed content, including free-with-Prime SVOD options and movies for rent or sale. This is another way that it monetizes the Fire TV platform. So while Amazon presumably didn't want Fire TV to be left out of the biggest app launch since Netflix, and Disney presumably didn't want its big Disney+ debut marred by lack of support for one of the most widely used home streaming platforms in the world, both companies also had reasons not to cooperate. I speculated about Disney's likely distaste for the Fire TV platform (at least as it contrasts with a more "agnostic" platform like Roku) when the story of the then-missing Fire TV app first broke.
We don't yet know if Disney agreed to Amazon's demands for ad space or what sort of compromise was reached. But we do know that Disney+ was available on Fire TV when it launched on Nov. 12, giving a happy last-minute ending to a prolonged disagreement between two streaming rivals that will play a large role in determining the future of this business. So far, Disney+ is growing even more quickly than analysts expected. For now, everyone's happy.