Michael Paull was thinking about streaming at a time when downloaded video was top of mind across the advertising and media landscape. His previous company BAMTech used streaming to solve a personal problem: “I’m from Los Angeles, I live in New York, I’m a Dodgers fan. And I wanted to be able to watch the Dodgers game. So what we did was, build a team and a technology to allow people to access out-of-market baseball games over the internet.”
BAMTech was acquired by Disney, and soon after Paull, now president of Disney+ and ESPN+, realized that streaming would be a field with many players. “It’s enormous, and it’s growing. Therefore, there’s room for a multitude of players. So I don’t think there’s going to be a winner takes all situation. If you look at traditional television, there was never a winner takes all situation.”
Since his appearance at Signal 2018, Disney+ has rolled out to great success with millions of subscribers. In the third quarter of 2021, the streaming service hit 116 million subscribers, surpassing expectations. In that same timeframe, ESPN+ boasted 14.9 million subscribers, up 8% from the previous quarter.
Hear more in his 2018 session and scroll down for the full transcript.
John Battelle: One of the themes that clearly ran through the morning was video, and how everything in the market has changed dramatically. And one of those changes, that is sort of most interesting to observers of the space, is how Netflix is getting some serious competition. As a matter of fact, it was rumored just this morning that it would be getting competition from yet another party, Walmart. We don’t know if that’s going to really happen. But what we do know and what has been announced, is that a major player is very, very serious about standing up a significant consumer-facing video over-the-top service, and that player is Disney. And the person responsible for that service is our next guest. So please join me in welcoming Michael Paull to the Signal stage.
Michael, thank you so much for coming. I think everyone is very excited that a company with the long history and brand of Disney is tackling a very significant market where it seemed like there was one player who had just kind of won and it was over. But, you know, Disney has such an amazing amount of brands, such a remarkable family of brands. We all want to know absolutely about everything you’re doing. And I know that you can’t talk about all the specifics. But I will ask you this: What can you tell us about what you’re doing?
Michael Paull: Well, I actually brought the business plan, I was going to hand it out. It’s very detailed, that’s my only warning. No, I mean, joking aside, there’s not a lot that we are talking about publicly about the service coming next year. What we are talking about is that we will be launching the service next year, it will be a family-friendly offering. So the market positioning that we’re going after that we believe has real consumer demand and a real need is a family-friendly, over-the-top spot offering. It’s going to include all of our brands, from Disney to Pixar to Marvel to Star Wars. And we think it’s going to offer an incredible user experience, both from the programming that we have created, the movies that we’ll continue to put out and the original programming that we’re going to create, based on all of these brands that have passionate consumers all over the world. So that’s mostly what I can talk about, we’re really in the process of thinking about, how can we innovate on the product? How can we innovate on the user experience? To really differentiate the service and make it excellent.
John Battelle: Yeah. I mean, the brands themselves differentiate, and I imagine you can build a, you know, 100 million-plus subscriber business just on those brands, probably just on Star Wars, there’s so many fans of that franchise. But the model that is already established out there is one where billions and billions of dollars are spent on original programming, Disney’s already doing that. And where there are major production houses that basically do nothing but create spec shows that they will either sell the Netflix, or they’ll sell to Amazon, or they’ll sell to whomever. Is it only going to be Disney-produced stuff? Or are you going to also open yourself up to that sort of third-party marketplace? Are you going to tell me you can’t tell me?
Michael Paull: I think we’re looking at a lot of options. At the end of the day, what we believe in is leveraging the great brands that we have. And we’re looking at various options on how to bring that to the consumer. Right.
John Battelle: Okay, I could probably repeat these kinds of questions for the rest of the time. But I’ll spare you at least for the moment. So but you have a quite an interesting history. I came to know of you because of your work with a service called BAMTech. And BAMTech was majority-acquired by Disney. So tell us how you came into Disney and what is BAMTech?
Michael Paull: Sure. SoI came into Disney through the majority-control acquisition of BAMTech. BAMTech is a digital media company. It’s really a technology and digital media company that was originally started in 2000, inside of Major League Baseball. And what we were trying to do is solve this fairly simple problem that existed back then, which was to bring baseball to fans. And interestingly, if you go all the way back to those days, a simple problem existed that still exists today: People who come from a certain city and have great passion and love for a team and move to another city didn’t have a way to enjoy the games they wanted to watch. So, for example, I’m from Los Angeles, I live in New York, I’m a Dodgers fan. And I want to be able to watch Dodgers games. So what we did was build a team and a technology to allow people to access out-of-market baseball games over the internet. And really, the reason we did it is people wanted it. It was a real complaint that we were getting. And we saw an opportunity because at the time, most people were thinking about how can you download video, and nobody was thinking about how can you stream it. And certainly they weren’t thinking about how can you stream things live. That was a really, really interesting and hard problem to solve that we were able to do. And we launched our first OTT video product in 2002, called mlb.tv.
Building on that success, we actually took on other challenges, including building HBO NOW, building PlayStation view, supporting Fox Sports., Hulu we’ve done work for. And then of course, Disney came to us and wanted us to do some work for them. So as we were building this business, and really built an incredible capability at delivering products to consumers on a direct to consumer basis, and streaming video content, flawlessly and innovating on features, not just you know, to mobile devices, but to a broad array of connected TV devices. We started to watch our business build and the momentum develop.
John Battelle: Yeah, I mean, what’s interesting about BAMTech is two things. One, you don’t look to major sports leagues to be innovators in tech. I mean, it just isn’t where you might expect it to happen. But that’s exactly what did happen. Was that because you happened to be there and your team happened to kind of coalesce around this? Or was it an intentional thing that the company kind of disrupted itself? And that ladders to some of the issues we’ve been discussing already, and the theme of the conference, which is, how did you lead that disruption?
Michael Paull: Yeah, and I joined later. So I think the way the company led the disruption was, it saw market opportunity. And interestingly, it wasn’t going to cannibalize the core business. So it was a unique situation where the company was able to pursue something without all those innovators’ dilemmas. Because the reality was, there was a market need that wasn’t being met, as opposed to, “Oh, we’re seeing a shift in the business.” When I came on board, I think by the time that happened, the reality was that the shift was starting to happen. And now what I was brought in to do is really just double down on this business and accelerate it.
John Battelle: Right. Now, you have this third-party business within BAMTech. And and you know, it wasn’t like Netflix, which was solving the same problem, which was like, Hey, we’re Netflix, we’re gonna help you, HBO NOW. You know, here’s our tech, you know, just pay us a little money and you’re now an OEM of ours. But that was exactly what you guys were doing. And I think there was some fear that with with the Disney acquisition, that would go away, and there would no longer be a third factor which is that if P&G decided tomorrow they wanted to be an OTT service, they wouldn’t be able to work with BAMTech and or Disney to create that. But you are committed to maintaining that business.
Michael Paull: We look at the third-party business as an important part of the overall organization. When I think about our ability to innovate, for our first-party services, I’ve got a product team that is thinking about how do we innovate for these services. And we’ll deploy on those ideas. Maybe I have some good ideas here and there. But if I have a number of really interesting third-party services that we are actually working with, and brainstorming and building great innovative products and features, now all of a sudden, our intelligence, our capabilities, grows exponentially. And interestingly, while I’m doing that, while I’m getting the benefit of all that innovation, I’m getting paid. So yes, if P&G is interested in going down this road, we’d love to have the conversation.
John Battelle: Well, I think they’ll see how the Katie deal goes and then they’ll start a subscription service and everything is going to be coming up roses. Now, let me ask you a question, which you may not have an answer to. But what the heck do you consider the new Disney streaming services business? You know that you’re plOTTing for next year? And when you think about it, do you think about it as a Netflix killer? Or is it a complement? Is it, you know, well, we have these amazing brands and, you know, Netflix is over here. But you know, people are gonna subscribe to more than one thing. Which way are you going? If you can tell me?
Michael Paull: Sure. I think actually, Bob Iger was pretty clear on his vision for this, and I 100% agree with it, which is they’re complementary services. If you think about the amount of viewership, the amount of time and eyeballs that is being spent in the OTT video space, it’s enormous and it’s growing. Therefore, there’s room for a multitude of players. So I don’t think there’s going to be a winner takes all situation, if you look at traditional television, there was never a winner takes all situation. And I think the same applies in this space. So in my mind, we view it as a complementary service. I think that many people that are Netflix subscribers will subscribe to this service. And interestingly, I remember when some of the initial press came out about this, Reed Hastings even said he was gonna subscribe, and we look forward to him signing up.
John Battelle: Yeah, and you should probably charge him just a little bit more. I mean, it is a winner take most business, it feels like. Netflix has spent, I think $13 billion last year on programming. And they have a pretty extraordinary approach to it, which feels, you know, that you make a show for Netflix, I have a lot of friends who do this. And they have no idea how it will be distributed, they have no idea if it will hit, it really is up to this black box. And Netflix has put stuff in front of people and samples that the data says this is going to hit it hits, which is very different than how Showtime makes a decision, for example, or HBO, which is they need to make sure this show they’re spending this much money on is in fact going to pay off. There are thousands of shows on Netflix that none of us have ever seen. And none of us ever will see, because Netflix never shows it to us. How do you think about innovating in that world of algorithmic UX driven decision making?
Michael Paull: So on one hand, I’m a big believer in data-driven decision-making. And I think as we build this business, we are going to instrument it really, really well. And use the data as a feedback loop and make sure that we’re creating the right programming and putting the right programming in front of the right people at the right times. That being said, one of the core competencies of The Walt Disney Company is actually quality content and quality brands. So if you look at their history and their success, or our history and our success, it’s been on picking a smaller number of winners, as opposed to going for a large quantity. And hoping for a few. So we will take the same approach with this service where we will look for quality over quantity.
John Battelle: Yeah, I mean, that was much in the news over the last week. There’s a lot of analysis, some of it I would say flawed about the recent meeting with the AT&T CEO and the HBO crew about it. We got a bigger HBO and everyone’s like, No, don’t do that. You know, keep making things like Game of Thrones don’t make you know, forty knockoffs of Game of Thrones. Although maybe most of us would like to see at least a few of those, because it’s ending soon. It’s kind of an unfair advantage to start with, like the entire universe of Marvel, the entire universe of Star Wars, the entire all of ESPN, you know, all of those. Now ESPN already has a service. How is that going to be integrated with this? Or have you not made that decision?
Michael Paull: They’re separate. We built the ESPN+ service and launched it in April of this year. And it’s off to a really good start. And we’re really excited about it. But, you know, we’re viewing them as separate products and separate experiences. So the ESPN+ service, we actually integrated into the overall ESPN digital experience, because what we recognized is we had a big install base of users and fans, and we thought, Hey, we could satisfy their needs for additional programming and additional sports. And that’s made a lot of sense. With regard to the SVOD service that we’re launching, you know, there’s no such thing as like, the all of Disney website, for example, aside from you know, I guess we have disney.com. So we’re really going to create a very specific user experience for this set of brands, which has been part of the really interesting challenge that we’ve been going after.
John Battelle: Let me ask a question I imagine everyone in the room is probably wondering, which is, how can a company like P&G work with you in the future? Are you going to be working with marketers? Are you going to be co-producing as we heard Marc and Katie talked about this morning? Do you have a model yet? Are you still playing with it?
Michael Paull: Sure. I mean, we’re open to a variety of models, you know, we’re very intellectually curious. So if there are great ideas, we want to hear them, we want to explore them, we want to evaluate them. The ways that we have been working with marketers in the past, I’ll give you an example from what we did with ESPN+. When we launched ESPN+, we did a co-marketing partnership with American Express. And for the launch, we did an extended free trial for all American Express current subscribers and potential subscribers and it was brought to you by American Express. We previously promoted it through all of the media that we were doing to launch the service, they were promoting it through a bunch of the media they were doing on their acquisition and engagement activities. And it’s been a really nice success. So on one hand, there’s definitely an opportunity to work together to create awareness and to integrate brands and co-market.
We are going to be creating quite a bit of content. In our traditional business, we’ve worked with brands on content creation, I think that’s something that we will of course explore with the SVOD service. We are not going to have interstitial video ads, but ESPN+ definitely, you know, we have an experience. Most of the programming that’s part of ESPN+ is live sporting events, and there are natural breaks. And we are integrating in a really, really good way. I think it’s going really, really well. So I definitely think there are ways to work together. And, you know, the other thing I’d say is, you know, we’re going to be very data focused. So as we work together, we’re really looking to get to the right people at the right time. in the right mood.
John Battelle: You’ve had now a lot of experience both with BAMTech and now with what you’re building. And direct to consumer is very much on the lips of everyone here thinking about how do I create a tighter bond? And I have teams who are really connected to consumers and using that data in ways to iterate quickly and, you know, revise products and messaging. What have you learned doing that? What insights might you share?
Michael Paull: I mean, I think building direct consumer businesses, you know, it takes a lot of work. It requires that you build trust with consumers. So when we talk about things like collecting data, you know, I take it from the perspective of how do we use that data to delight consumers? Like how do we focus on the consumer, and everything that we’re doing with the consumer, we’re trying to do it to provide a better experience, recognizing we do need to build a business, and we want to monetize the business. But I really believe to successfully build direct consumer businesses, you need to constantly think about that consumer and you need to protect the trust between the consumer and the business.
John Battelle: Now, there is still a really big business called television. As we were, as we used to understand it, and it is really important to P&G, it’s really important to Disney. Where does that go? Does it go away? Does it stabilize and just become one of many distribution channels? What’s the future of television as we knew it?
Michael Paull: I think television, one, I think the definition of television simply expands. I don’t know that, when we say television that, it has to go to the consumer through a cable box. Why is that so different from going over IP to a connected device? So television, in my mind, is television. So I think it continues, I think it flourishes. But if you’re talking about linear television, I think that also continues. The reality is, I think it will always be part of the marketing mix. So, you know, it may not be the largest part of the marketing mix in 20 years. But, you know, the reality is there are different components of a marketing mix, and you need all of them, at least in my experience, to make it work. And I think TV is still exceptionally effective.
John Battelle: Do you see anything in the near term horizon that, if you are a marketer, technologically is going to change things that that they need to pay attention to, or perhaps having paid attention to, may gain advantage from being first to leverage? Are there new technologies coming in video that are worth knowing about?
Michael Paull: I think there’s a couple of things. I know one of the innovations that we spent a lot of time on is, when you think about OTT video and ad insertion, a lot of work and a lot of technological innovation happened to be able to insert ads into a video on demand. And I think people have figured out how to do that really, really well. However, inserting ads into live events is much more treacherous. If you watch the consumer experience, you watch the flaws that happen there are way, way higher. So we’ve actually, you know, being that we primarily have come at it as a subscription business where ad revenue is important, but it’s, you know, a portion of the overall revenue that we generate, we’ve been building technology to protect that experience, both for advertisers and consumers, and create sort of a more effective medium in to insert dynamically insert ads into live events. So I think that’s one thing that’s very positive, because when you think about it, if you’re inserting ads into video, and you’re killing somebody’s ability to watch that video, I think it’s gonna have the opposite effect of what you’re looking for. You want the ad to elegantly be inserted, get your message across, and then allow people to go back to the programming. The other area of innovation that we’ve been talking about is how do we take the data and really use it in a really, really effective way. So we can provide great results for advertisers.
John Battelle: All of us are now familiar with the programmatic display space, which has grown up over the last 10 or so years. It’s extremely sophisticated, complicated, and fraught, but it works. P&G was a leader early in this space. And it is true now that you can buy an audience, you can instantaneously inject unique ads against segments of that audience in a fluid way. You get data from that, and, you know, lather, rinse, repeat. Will that ever be true in this new television world where you can just identify the audience in real time and just start testing and changing the ads, knowing that that all just works on the back end?
Michael Paull: I think it can, I think there are other components of the equation. So I think that method will work and will continue to work. I do think one of the other components, though, is the state of mind that the viewer is in. And I think, you know, there’s certain states of mind that are better, and certain states that are worse. And I think that’s going to need to be, you know, added into the equation.
John Battelle: “I am pro-context.” Love that concept. So, lastly, I want to ask you about your former employer. You worked at Amazon, prior to BAMTech and Disney. What was that like? I mean, Amazon is one of these black boxes I think people are really interested in, and clearly they are a significant competitor to almost everybody in almost everything. So is Amazon going to be a competitor to Disney streaming services? Is it a place that, you know, we should fear? respect? embrace?
Michael Paull: I think, you know, when I think about Amazon, I think the best way to describe the company is, it’s awesome. The reality is the ambition of the company is vast. The intelligence of the people is also vast, and I found it personally to be a great experience. It’s a company that’s very focused on consumers and on scaling businesses. So on one hand, as a consumer and as you know, if you’re a supplier or you know, we use AWS, for example. They’re a great partner. And, you know, I can only say good things about my experience working there.
John Battelle: You’re not afraid of them at all.
Michael Paull: I’m not afraid of them. What I found is, there’s always opportunities for people who are innovating. You see big companies, and go, nobody’s been able to compete with them. And the next thing, you know, someone comes out and comes out of nowhere and, right, Amazon’s a good example. Like, who would have thought Amazon in the early days could compete with Walmart? Oh, there’s no way, no way. Next thing you know, they’re competing with Walmart. And you’ve seen this in multiple spaces. And I think as the Internet has evolved, that time for the new guy to be able to disrupt the incumbent has shortened and I think it took decades, many decades ago and now it takes a year, you know, single digit year.
John Battelle: Yeah, absolutely. We have time for one question from the audience. I know that there’s one over here. Can we run a mic if possible.
Audience: [inaudible] organized startups compared to your other more established businesses. How do you organize plan?
Michael Paull: Sure. So what Bob did not too long ago, and in light of our sort of new ambition, is he created a new business segment called direct to consumer and international. And in this business segment, he put our direct to consumer businesses, as well as our global ad sales organization as well as our content distribution organizations. And what it did was it aligned the key parts of our businesses to allow us to focus on them and build these businesses on a global basis. So it’s not some small little thing over here trying to incubate. We’re part of the core.
John Battelle: Awesome. I wish we could do more questions, but unfortunately, we did run out of time. Michael, thank you so much for coming, giving us a little insight into Disney.
Michael Paull: Thank you.