Walt’s Nightmare: Betrayal and Disenchantment

The Walt Disney Co. corporation announced in interviews [1] confirmed to several media outlets in the region [2] and notified in writing to some cable operators[3]that before the end of the first quarter of 2022, it will discontinue signals in its Spanish-language television offerings for Latin America, including NatGeo Wil, NatGeo Kids, DisneyXD, FXM and Star Life.

For its part in Brazil, it will end the Disney Junior signals and change the name of Star Life to Cinecanal.[4].

Why has Disney decided to withdraw its TV offer and why can it be considered as a betrayal to Cable Operators?

By: Gabriel E. Levy B.

For several decades, international content providers, such as DISNEY, found in cable operators their greatest allies for the sale and marketing of content, a thriving market that generated wealth for creators and expanded the frontiers of the audiovisual industry.

For more than 30 years, cable operators have acted as direct intermediaries in the distribution of content, bringing television signals to subscribers’ homes, being responsible for the marketing, distribution, sale and collection of money for the different content providers, a colossal effort that has meant the deployment of thousands of kilometers of fiber optic networks, coaxial cables and even satellite infrastructure.

The subscription television business is based on two major structures: on the one hand, content providers or channels that invest in programming, and on the other hand, cable operators that invest in infrastructure. While the channels acquire content, the cable operators acquire customers and this synergy generates wealth for all parties.

The relationship between channels and cable operators has historically been marked by hatred and love, it has been a marriage in permanent crisis, either due to high content costs, under-reporting by operators, forced bundling and many other reasons.

However, when analyzed with some distance, it is possible to affirm that both parties have gained and grown thanks to the sum of their efforts, capacities and infrastructures, in the end it has been a profitable partnership for all.

This is the main reason why, although predictable and expected, The Walt Disney Co.’s unilateral decision to abandon its historical partners in order to strengthen its new business unit to their detriment is surprising:

“To adapt to the new context derived from the convergence of the businesses operated by the Company, and in order to be more agile to respond to the changing landscape and better position ourselves for the future, the Company has taken the decision to close the Nat Geo Wild, Nat Geo Kids, Disney XD, FXM and Star Life channels throughout Latin America and, in Brazil, also discontinue Disney Junior and rebrand Star Life to Cinecanal, at the end of March 2022.“[5].

OTT Platforms the Tipping Point

The global growth of Internet broadband and, consequently, the increase in browsing speeds, brought as one of its main consequences the expansion of connected video, i.e. the possibility for users to massively consume audiovisual content over the Internet, something unthinkable decades ago.

YouTube, which belongs to the Google group, today owned by the Alphabet corporation, was perhaps the first massive experience of connected video consumption witnessed by mankind and was the turning point for a growing industry whose main exponents today are Netflix, Amazon, Hulu, Vimeo, among others.

The possibility of directly marketing content through OTT platforms has become an attractive opportunity for some signal providers, from film producers to small production houses, even for many creators in the present imagination it is more important to sell to a platform such as Netflix than to a television channel such as Cinecanal.

In the case of the subscription TV programmers themselves, i.e. the so-called international channels, this has not been the exception and some, such as HBO, have tried since the launch of their OTTs to bypass cable operators by marketing directly, although for now their results are much lower than their own projections.

Today it is possible to state that practically all international content programmers have their own OTT (Over The Top Platform) for Internet Video, however, this is a complementary service that has even allowed them to strengthen their relationship with their strategic partners: Cable Operators, since it is offered as a plus to traditional TV packages.

Since a few months ago, as we have analyzed, DISNEY launched its own OTT Video platform, called DISNEY+, after the acquisition of Fox, Espn and other famous brands such as Star Wars.

Disney+ in its beginnings had a great boom and reception, but as time went by it began to deflate, mainly in the single or childless adult market.

This seems to be, without a doubt, the main reason why Disney decided to withdraw its television channels from the market and concentrate exclusively on the direct commercialization of content over the Internet, through its OTT platform, skipping cable operators.

This same strategy was unsuccessfully tried in the past by HBO with HBO GO and now with HBOMAX, and although these types of movements are explained by the new logics of a changing market seduced by Video on Demand, this argument is not enough, since traditional television is still alive, especially in Latin America, where the phenomenon of Cord Cutting and Cord Shaving (reduction in cable packages), have not yet had a major impact on the markets.


Parasitic use of networks

While any unsuspecting reader might find the programmers’ strategy of selling their products directly and collecting money without intermediaries legitimate, that logic would be valid if the programmers were to use their own network infrastructure, i.e. if DISNEY were to pay for a fiber optic deployment at least similar to what the cable operators deployed at the time.

However, this is not the case, because under the principle of net neutrality, DISNEY will use for free, without paying a single cent and through the Internet, the networks of its former partners, to take away the business of content marketing, on the same customers, while congesting and saturating their networks with high loads of video traffic, forcing them to have to invest more money in infrastructure expansions, without paying them for the use of their networks.

In other words, they will reduce their income and increase their costs.

In other words, DISNEY planned and executed a commercial strategy, which ultimately turned out to be a betrayal of its partners, taking all the business it had built with them.

It goes without saying that this type of behavior is surprising in a corporation whose main target audience is children.

What would Walt Disney, who founded a company based on solid ethical principles, think?

The Youtube and Netflix model

It should be noted that these types of practices are the same ones that Netflix, Youtube and Amazon have implemented for years, however, none of these corporations have been commercial partners of cable operators, unlike DISNEY, which owes its presence in Latin American markets to these companies.

DISNEY will now give parasitic competition to its former partners, disregarding what it has built for decades and threatening the survival of those who helped it penetrate one of the most difficult, irregular and unstable global markets in the world.

Although the principle of opportunity prevails in business, loyalty is an important value that demonstrates the honorability of individuals, corporations and organizations.

Gratitude is both a virtue and an excellent calling card; however, it seems that in the case of DISNEY, money takes precedence over these values.

In conclusion,

The decision announced by Disney to discontinue the Spanish-language television signals for Latin America, NatGeo Wil, NatGeo Kids, DisneyXD, FXM and Star Life, although it is legal and is part of the autonomy of each provider to establish the rules of the game for its business, in practice is a commercial betrayal against Cable Operators, those allies that for decades helped Disney to penetrate the Latin American market and that now have decided to become its competitors, using its infrastructure in a parasitic way, In practice, it is a commercial betrayal against cable operators, those allies that for decades helped it to penetrate the Latin American market and that now have decided to become its competitors, using its infrastructure in a parasitic manner, congesting its networks and taking its customers, without any compensation whatsoever.


Disclaimer: This article corresponds to a review and analysis in the context of digital transformation in the information society, and is duly supported by reliable and verified academic and/or journalistic sources, which have been demarcated and published.
The information contained in this journalistic and opinion article does not necessarily represent the position of Andinalink, or the entities with which it develops its commercial relations.
[1] XATACA article on Disney decision
[2]  Tavilatam article on Disney’s decision to Withdraw its signal from Latin America
[3] Todo TV News Press Article on the news of the withdrawal of Disney channels.  
[4] Disney’s formal notice to Cable Operador Argentino
[5] IPuntoTV News
[5] Statements made by Disney to the specialized media Xataca