Richard Plepler

What Skipper is saying here is that Disney and ESPN made the content. ESPN, for instance, racked up sports rights, cultivated on-air talent, and expanded into narrative documentaries. But it never once had to send a bill to a customer. So maybe there was something more holding Disney back from making a switch to streaming. Something more than pie charts and future modeling.

Maybe it was Disney's own understanding of its place in the world order. Disney wasn't a tech company like Netflix, nor was it a distributor also like Netflix. Early on, Disney did partner with other big media companies to build a Hulu, but it mostly existed to make next-day reruns of broadcast shows available online. You originally didn't even need a paid subscription to watch.

But fully owning and operating a Disney-branded streaming platform just did not feel like the company's lane, and it didn't feel like a good investment either. So why not dip a toe in and let another company handle the hard stuff? A company that could eat the cost of maintaining the platform. Someone to deal with the people.

A partner who would pay Disney a lot of money for the privilege of streaming its movies for them. Disney turned to the incumbent.

Disney had already worked out a fairly lucrative deal in 2010 for Netflix to stream some ABC shows. But now, in 2012, Disney was about to make an even bigger deal. Netflix would pay Disney about $300 million a year for the rights to stream the latest Disney movies. Some stuff from the vault, too.

For Disney, this was sort of like free money from Netflix, and the company got to be where consumers were. This partnership would allow Disney to stay in its lane. But the deal had some unintended consequences.

Here's Bob Iger talking to Kara Swisher in 2022 during a brief window of time when he was not Disney CEO.

And Netflix wasn't just using Disney's movies to grow. There were those ABC shows like Lost and Grey's Anatomy that Disney had licensed to Netflix. And Disney even began making original Marvel shows for the streamer.

This was Disney feeding its very own DNA directly into the Netflix machine, giving over its precious IP to engineer specific shows designed to convince consumers to sign up for Netflix.

By supplying great content to Netflix, Disney was getting paid. But it was also building Netflix's business, helping it become a primary pick for home entertainment. Disney thought its identity as an entertainment company would keep it relevant over a tech company. But as more and more people turned to Netflix for entertainment, it all got a little confusing for Disney.

But the lines were beginning to blur. Was Disney's partner actually the competition? Disney thought it had some time to figure things out. Here's Matthew Ball, an author and independent analyst today. Ball has been watching the streaming war since he was the head of strategy for Amazon Studios.

But between 2012, when Disney made its movie deal with Netflix, and 2015, when Bob Iger called HBO's Richard Plepler, viewing habits rapidly changed. Internet speeds in the US more than doubled within the space of a few years, making streaming feasible for more people.

And devices from companies like Roku and Apple took off, making it easier than ever to watch streaming services like Netflix directly on your TV set instead of on a computer or iPad. And within that same period, Netflix started to stand out as a destination for original, top-of-the-line shows. It outbid traditional studios to make House of Cards with top-tier talent.

created a viral sensation with Orange is the New Black. And yes, it began production on a series of Disney Marvel originals, Daredevil, Jessica Jones, Luke Cage, and more. With Disney's help, Netflix had torn down the wall between content companies and tech companies.

Which, in retrospect, might look like an absolutely bonkers business strategy on the part of Disney. But John Skipper says it's more complicated than that. The Wall Street beast needed to be fed.

And just because you know something's out there doesn't mean you can avoid crashing into it, even if you're the CEO.

By 2015, Iger had caught on. He was watching Game of Thrones on HBO's shiny new streaming platform. And ESPN's cable subscribers had started to make a big enough dip for him to feel like he had to tell investors about it.

Meanwhile, Netflix wasn't the only tech company that had made the leap into entertainment. Amazon was starting to produce zeitgeist shows like Transparent. And studios that made premium content were sprouting up in previously unlikely places. So now it was time for Disney to make a pivot, for the entertainment company to act like a tech company, for Disney to become a streamer itself.

Step one, it made its first big investment in BAM tech in 2016, and eventually bought the whole company for more than $3.5 billion.

But Skipper, along with Kevin Mayer, who would go on to lead Disney's streaming reconfiguration, didn't think there was too high a price for this technology. BamTech was the best in class, and Disney needed a quick way to speed to the top.