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The internet comes for every sector of the media business, eventually. No one has a moat.
So eventually, everyone in the media business has a choice: Change their business to adapt to the internet, or hang on to the old business, as long as they can.
But the first option is really hard, and involves trading a business that works for one that's unknown. And the second option usually pays well, until the end, when it doesn't.
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Which is why almost everyone tries the second option, even if they say they want to do the first one.
So that's the context for Disney's announcement yesterday, when CEO Bob Iger said his company would start selling two kinds of streaming services: An ESPN-branded one, scheduled for 2018, and a Disney-branded movie service, set for 2019.
On his earnings call, Iger described the moves as a "major strategic shift in the way we distribute our content."
At the end of the call, he neatly summed up what that meant: Disney wants to move away from selling some of its most valuable content, like movies and live sports, to middlemen, and move toward selling them directly to customers.
In other words: It's going to adapt to the internet, which makes that possible, and makes it necessary.
Here's his full description of the change. Note the part about the new model eventually making more money than the old model:
"We've got this unbelievably passionate base of Disney consumers worldwide, and [in] virtually all of our businesses except theme parks we've never had the opportunity to even connect with them directly and know [who] they are. And it's high time that we got into the business, particularly with the technology available to us, to accomplish that.
Once we do, if this gives us the ability to do it, then I think the monetization possibilities are extraordinary for this company.
There will be some sacrifices. Obviously, as you move product from ... a licensed-to-third-party model to a self-distributed model, you're foregoing the licensing revenue that you get for whatever revenues you generate by [selling it yourself].
We believe that ultimately — I can't give you an idea of when or how long — the profitability, the revenue-generating capability of this initiative is substantially greater than the business models that we're currently being served by. "
It is a big deal to hear the CEO of a giant, publicly traded media company say he's going to fundamentally shift his business model.
But note that Iger, whose most recent contract extension has him leaving in the middle of 2019 — perhaps before Disney launches its movie service — also left himself an indefinite amount of time to make that switch.
And he's not doing it all at once.
The move to pull (at least some of) his movies off of Netflix means he's swapping out Netflix's guaranteed money for an unknown sum he hopes consumers will pay.
Iger's initial plans to launch an ESPN service aren't nearly as dramatic, though: Iger wants to sell consumers a new service with stuff that's not already running on ESPN.
He doesn't want to compete with ESPN, which he sells to pay TV operators like Comcast and Charter; he wants to sell an extra version of ESPN.
Related: Netflix may have been paying Disney hundreds of millions of dollars a year for the right to stream its movies. But pay TV operators are paying Disney billions of dollars a year for ESPN.
So Disney can sell its own movies to consumers and risk making less money than it gets from Netflix. But it's not in a position — yet — to gamble on the money it makes selling sports to the cable guys.
The trick for Iger — or whoever takes over for him — will be deciding when to make that bet.
CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.