For the Walt Disney Co., Nov. 12 is going to be D+ Day. It’s when the much-hyped, much-anticipated and perhaps most important streaming service, Disney+, will make its debut.
Disney raised a lot of expectations when it announced plans for the service in April, promising a streaming service chock full of programming, including library fare and originals, priced aggressively at $6.99 per month.
Disney has since stacked up distribution outlets for the service. Verizon Communications will offer Disney+ free for a year to unlimited data customers, and the service will be available via Roku, PlayStation consoles, Amazon Fire Stick, Samsung, LG and other streaming devices. (Amazon had been a question mark.) Disney+ also will be available in a bundle with ESPN+ and ad-supported Hulu for $12.99 a month.
Disney+ has plenty of rivals, of course, starting with Netflix and Amazon Prime and most recently including Apple’s $4.99 per month Apple TV+, which launched on Nov. 1.
AT&T will debut HBO Max in May, around the same time that NBCUniversal plans to roll out Peacock (which could be free to existing pay TV customers).
Mouse Set to Roar
Disney+ looks like the service to beat, though, based on content, price and packaging.
Such is the anticipation around Disney+ that most analysts and investors didn’t mind that Disney’s own fiscal Q4 results weren’t so great. Revenue was up 34% (mainly due to the purchase of Fox assets earlier in the year), but net income was down more than 50% and operating profits at the Media Networks division fell 3% in the period. Disney shares closed Nov. 8 up nearly 4% to $137.96 each.
“For now, the Disney investor story will likely be driven by the metrics surrounding the coming launch of Disney+,” MoffettNathanson media analyst Michael Nathanson said in a note to clients. “Given the magnificent promotional machine that is Disney and the recent partnership with Verizon, investors are ‘dreaming the dream,’ which is what we expected would happen and should push the Disney multiple higher.”
Nathanson predicted Disney+ will have about 8 million customers by the end of this year, more than doubling to 18 million a year from now. But given Disney’s plans to launch the service in Western Europe in March — earlier than previously expected — and the likelihood of additional bundling opportunities with telephone companies, he conceded he might be underestimating its strength in its first year.
“As we have vividly seen at Netflix, when moving in the right direction, momentum in subscriber growth makes those metrics investors’ sole focus … and the market is sensing big things are brewing in the quarters ahead,” Nathanson wrote.
Based on Disney+ branding, content and pricing, “we think they’re going to be equal to Netflix in two to three years, and we’ll see if Netflix hangs onto their current subscriber base,” Jeffrey Cole, director of the Center for the Digital Future at USC Annenberg, told attendees at the CTAM Think research conference in New York on Nov. 6. (Netflix has 60 million-plus U.S. subscribers.)
Disney chairman and CEO Bob Iger offered some more details about the launch, saying initially the service will offer 10 original movies, specials and series exclusively, including the heavily promoted Star Wars universe live-action series The Mandalorian. Within a year, Iger said, the number of original movies, series and specials will grow to 45, reaching 60 by year five.
Massive Marketing Effort
“With the launch of Disney+, we’re making a huge statement about the future of media and entertainment and our continued ability to thrive in this new era,” Iger said, adding that the service will also enjoy the support of Disney’s enormous worldwide marketing engine. Iger said the marketing will draw on every existing connection Disney has with its consumers.
Disney’s financial heft also “allows it to to experiment with discounting and promotional offers while continuing to heavily invest in content to support the service,” Fitch Ratings director Patrice Cucinello noted. Disney already has tweaked the pricing, offering Disney+ for $4.99 per month for customers who agree to a three-year contract. That should help overall churn, she observed.
“Fitch also believes that Disney’s family-friendly content and extensive content library/IP will provide a degree of stickiness for the streaming service,” she added.
Iger also said Disney-controlled Hulu will become the streaming home for FX programming, beginning next March. Hulu will include full seasons of more than 40 FX series, offering episodes or current and new shows immediately after they air on the linear network. FX also will produce new “FX on Hulu” shows for the streaming service, beginning with four new series next year.
“[W]e’re creating a huge FX presence on Hulu,” Iger said on Disney’s earnings call.
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