Disney+ has a grand strategic logic that, if executed smartly, should pay off for decades to come
DISNEY DID not need to launch a digital-video service to remain one of the most profitable media firms on earth. In a busy marketplace for subscription video-on-demand , top content licences are at a premium—and no content is more valuable than Disney’s.
In 2019 the company is probably going to be behind each of the eight highest-grossing films of the year. The previous record for such dominance, set in 2016, saw one studio claim the top five spots. Again, that studio was the so-called “House of Mouse”.Disney could have chosen to keep doing what it has done for the past decade: collect ever more billions in no-risk profit by simply transferring digital copies of its films and TV series to Amazon, or Netflix, or HBO, or Apple, or Sky. Instead, Disney decided to invest in building its own SVOD service, Disney+, which launched on November 12th. The first day was marred by technical glitches, which the company said were caused by the fact that demand for the new service had “exceeded our highest expectations”. The move into video streaming is a decision that will cost the company billions in the short run, but Disney+ has a grander strategic logic that, if executed intelligently, should pay off for decades to come. The shift to Disney+ is expensive up front in several obvious ways. First, the company bought BAMTech Media, a leader in digital-video streaming, for roughly $3bn. Shortly thereafter, Disney spent another $85bn buying 21st Century Fox in order to expand its store of content and intellectual property . In the coming years, Disney will spend billions more on new original series and films for its service. It will also forgo about $4.5bn in profit per year by holding back licences to content it was already making, according to Michael Nathanson, an analyst. Given the scale of these sums, the industry was shocked when Disney announced in April that Disney+ would cost only $7 per month . Netflix’s most popular plan, by comparison, costs $13 per month; HBO’s service costs $15. Some interpreted this move as a lack of faith in the offering. Others wondered how Disney could ever recoup its investment at such low prices; Disney estimates it would break even at 60m-90m subscribers globally. Disney then announced it would also provide a three-year offer that would cost less than $4 per month. A few weeks later, Disney formed a partnership with Verizon, the largest wireless provider in America, in which Disney+ would be given free to 17m-18m of its subscribers for at least a year . Several other discounts and bundling deals exist. More still are likely to follow. There are a few tactical reasons for this approach. Not only is Disney releasing its service years after Netflix, Amazon and HBO amassed tens of millions of subscribers worldwide, but competition has never been as intense. On November 1st Apple launched its SVOD service, Apple TV+. In the second quarter of 2020 NBCUniversal will launch its own, Peacock, while AT&T will release HBO Max, which is expected to have more than twice the programming budget of today’s HBO. Jeffrey Katzenberg, a Hollywood executive and former chairman of Walt Disney Studios, is also preparing a service, Quibi, to launch around the same time. The low price of Disney+ will doubtless help the service attract subscribers. It will also help retain those who are frustrated to be missing “Star Wars” and Marvel films, as it will still be several years until Disney reclaims the full rights to its catalogue. But more important than short-term tactics is Disney’s long-term ambition. Behind the low price, hefty investment and considerable risk of Disney+ is a much greater prize: data and direct customer relationships. For decades, the Walt Disney Company has thrived because of the interconnection and cross-monetisation of each of its divisions. In 2018, for example, Disney’s Parks and Resorts division generated more than twice the revenue and 50% more profit than its film studio, even though one is responsible for the other’s popularity. This is what makes Disney+, and its reach, so important. It is about fortifying the entire Disney empire. For all of Disney’s success over the past century, it has never had a direct relationship with most of its individual consumers, let alone known which specific content and characters they like, and to what extent. Through Disney+ this will change. That should in turn allow the company to make more informed decisions about which content and merchandise to produce, increase the efficacy of its marketing and promotion, and sell more Disney-related products and experiences to Disney fans. Generating another $50 per year in SVOD is trivial compared with the ability to sell more $5,000 Disney family cruise vacations and $1,100 annual park passes. But to do so, Disney had to launch its own service. Among other constraints, distributors such as Netflix share only limited viewership data and no individual customer information. It is also hard to imagine such services buying Disney+ titles such as “Behind the Attraction”, a ten-hour series that gives a “deep-dive into the storied history” of popular Disney theme parks. This series is itself an instructive example of Disney’s synergy-centric approach to its video service. Disney’s multi-product strategy has led some analysts to compare the service with Amazon’s Prime Video, rather than Netflix. For that matter, Netflix is beginning to look rather solitary in its strategy. Apple is giving its original content away free to those who buy its phones, tablets or connected TV devices. AT&T is expected to give HBO Max away to tens of millions of its subscribers. The endgame in SVOD isn’t video, but entire ecosystems.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Kristen Bell Celebrates Disney+ Launch by Singing a History of Disney Songs with Jimmy FallonWith love for Disney classics from 'Snow White and the Seven Dwarves' all the way through the present, the 'Tonight Show' sketch is a blast from then and now.
Read more »
Disney Says Disney Plus Has Over 10 Million Sign-Ups AlreadyTouting “extraordinary demand,” Disney announced that Disney Plus had signed up over 10 million users since launching early on Nov. 12. Analysts had projected Disney Plus would achieve …
Read more »
Disney Says Disney Plus Has Over 10 Million Sign-Ups One Day After LaunchTouting “extraordinary demand,” Disney announced that Disney Plus had signed up over 10 million users in just one day since launching early on Nov. 12. Analysts had projected Disney Plu…
Read more »
Disney stock price jumps on Disney Plus sign-up count - Business InsiderThe streaming platform experienced technical difficulties on its launch day due to stronger-than-expected demand.
Read more »