How The Walt Disney Company (DIS) Can Upend the Cable Business

The transition is already under way — slowly
It may take a few years for there to be a mass exodus from cable to streaming services, but it’s already slowly under way. Remember, it was only a few years ago that Netflix became a big player in streaming, and on-demand is still a young concept. What we need now is more open contracts and increased capabilities for ESPN, Netflix, Hulu, HBO, etc., and then it won’t be so scary to be without cable.

Financially, it isn’t a stretch for content owners. For advertisers, the transition to streaming could be a plus. It’s much more difficult to avoid watching commercials when you’re streaming, live or on-demand. As with any new advertising medium, data needs to be collected so distributors and advertisers can accurately price ads. For example, Hulu generates more than half of its revenue from ads, and revenue grew 65% last year. Advertisers are clearly open to the streaming revolution.

ESPN holds the cards
Disney has far more power than most content owners in our transition to a cable-free world. With ESPN commanding a large portion of cable costs than most channels to begin with, it has pricing power and negotiating power. Disney is even building its own streaming business with Disney Movies Anywhere, so streaming is in the works throughout Disney.

Over the next few years I think we’ll see the tie between cable companies and content providers slowly cut, opening a streaming revolution. ESPN will lead the way.

The article How Disney Can Upend the Cable Business originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium manages an account that owns shares of Apple. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends Apple, Netflix, and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Apple, Netflix, and Walt Disney.

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