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Disney and YouTube Reach Content Deal for TV Programming

disney espn youtube smallDisney’s castle has been locked down tightly when it comes to distributing its video programming online but that now appears to be changing. Last week, word leaked that the company was discussing a possible content partnership and equity stake in News Corp’s and NBC / Universal’s joint venture, Hulu. This week, today, the Disney Media Group announced a content deal with YouTube.

The new arrangement will lead to the launch of several ad-supported YouTube channels featuring short-form programming from Disney’s ESPN, ABC, and SOAPnet brands. 

YouTube will monetize the content with overlay and display ads but Disney will have the option of selling the ad inventory itself. Disney will also be able to experiment with other ad formats including pre-roll video ads.

Anne Sweeney, co-chair of Disney Media Networks and president, Disney/ABC TV described the deal in a statement saying it “provides us with the opportunity to reach a broader online audience to experiment with different monetization models and to extend the reach of our advertisers within branded environments that they most desire."

It seems Disney’s chasing two strategic ends. The first is a sandbox. The deal creates an environment to test monetization strategies for video at someone else’s expense (since YouTube will handle the bandwidth and server overhead). 

The second benefit is simple promotion. YouTube’s massive audience is an easy vehicle for Disney/ABC to reach customers, fortify brand and drive traffic. To that end, it’s been confirmed that ABC and ESPN will be able to link YouTube hosted snippets back to feature length content on their own sites.

The channels will launch in April and May.

The Hulu Factor
Reports about a possible deal between Disney and Hulu continue to trickle out.  Disney’s deal with YouTube doesn’t diminish the possibility those reports could be accurate.  In fact, two deals could be complementary for Disney if YouTube remains an outlet for the short-form and Hulu goes long.

At this point, however, all that’s been reported between Disney and Hulu is that discussions are ongoing – and to a degree talk is cheap:   CBS talked to Hulu too but a deal wasn’t struck. 

Between equity distribution issues (NBC/Universal and News Corp each have an equal share in the site, and any new network joining is likely to have a difficult time gaining comparable footing), valuation issues (Providence Equity bought 10% of Hulu for $100m, effectively valuing the company at $1b at the time), and sizable questions relating to license terms (what programming is offered, how much of it, exclusivity or lack thereof,  how long content’s available on the site etc), the stumbling blocks to a Disney/Hulu  deal are substantial.

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