The Walt Disney Company just revealed that it paid $900 million to acquire the remaining 15% stake in a technology company called BAMTech that provides the entertainment giant with the services required to power its streaming platforms.
According to Disney’s 2022 annual report, which it filed with the US Securities and Exchange Commission (SEC) just yesterday, the transaction was settled this month after negotiating a deal with the Major League Baseball (MLB), the former owners of BAMTech.
By 1 October this year, the MLB’s stake in BAMTech was valued at $828 million in Disney’s books, meaning that the company paid a $72 million premium to fully own the streaming tech company.
BAMTech is the result of a spin-off of the MLB’s Advanced Media division, which it founded in 2000 to power its streaming initiative. Back in 2016, Disney acquired a 33% stake in the standalone company for $1 billion and paid another $1.58 billion a year after to purchase an additional 42% of BAMTech’s common shares.
Finally, in 2021, the National Hockey League (NHL) sold Disney (DIS) its 10% stake for $350 million. As a result, the firm held 85% of the common shares of BAMTech while the MLB held the remaining stock.
BAMTech Acquisition Will Give Disney an Edge in the Streaming Space
According to BAMTech’s official website, the company’s technology was used to power solutions such as ESPN360, the WWE Network streaming service, HBO NOW, FoxSportsGo, and MLS Live.
Disney’s streaming platforms powered by BAMTech’s technology include Disney+, ESPN+, Hulu, and Star+.
It is unclear how much money BAMTech generates from the services it performs for other businesses. By owning the entire company, Disney can have full control over the extent to which it will provide services to non-affiliated third parties while it can use the technology and know-how of the firm to develop proprietary solutions that may only be available to The Walt Disney Company.
This would give Disney+ and the rest of the company’s streaming services an edge over other streaming services that are not vertically integrated.
This latest corporate action comes only a few days after Bob Iger, the company’s legendary CEO, was brought back from retirement to replace Bob Chapek as the company started to struggle to live up to its promises when it comes to the performance of its direct-to-consumer (DTC) unit.
In a recent meeting with its employees, Iger emphasized that he will be focusing on making the streaming business a profitable endeavor rather than pushing for subscriber growth.
The company is expected to launch an ad-supported tier for its Disney+ service on 8 December. The new package will be available in the United States first and then it will be extended to many other geographical markets.
Disney’s Basic with Ads package will cost $7.99 a month or $3 less than the Premium ad-free package. In October this year, Netflix also announced that it will be making available an ad-supported subscription package that will cost $6.99 per month.
Combined Cost of Streaming Services Stands in the Way of Cord-Cutting
Video streaming companies have been competing fiercely to increase their user base at the fastest rate possible as the space is getting more and more crowded by the day. Meanwhile, consumers have been forced to pick among the many platforms available as subscribing to all of them is considered a costly alternative.
Experts in the industry agree that the high cost of subscribing to each provider individually is becoming an obstacle to cord-cutting. Meanwhile, cable companies have been taking advantage of this situation by offering bundles that include traditional cable services alongside a subscription to their proprietary streaming platform.
According to the website Cabletv.com, the cost of subscribing to the ad-free versions of HBO Max, Netflix, Prime Video, Disney+ and family, Apple TV, and Showtime stands at $83.45 per month.
Comparatively, the cost of Dish and DirecTV, two of the US’s most popular cable services, starts at $57.99 per month but goes up to $137.99 per month depending on how many channels the user would like to have access to.
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