The Walt Disney Co. on Thursday unveiled details of its pending online video platform, showcasing its robust content library and new exclusive offerings as a key differentiator as the entertainment giant prepares to enter the highly competitive streaming industry.
|DIS||THE WALT DISNEY CO.||176.02||-2.33||-1.31%|
Called Disney+, the service is slated to be released on November 12 and will cost $6.99 per month -- or an annual option of $69.99. It will house Disney’s own intellectual property -- eventually including classic films like the "Lion King" and "Snow White" -- as well as offerings from Pixar, Star Wars, Marvel and property acquired as part of the recent $71.3 billion purchase of key 21st Century Fox assets, like "The Simpsons" and National Geographic. The deal created the new Fox, which is the parent of FOX Business and Fox News.
“This is an exciting time [but] it’s also a challenging time and the dynamism of the marketplace is both powerful and permanent,” CEO Bob Iger told investors at the annual meeting. “We’re starting from a position of strength, confidence and unbridled optimism.”
The platform operates much like competitor Netflix, according to a demo of a working prototype, with prominent boxes at the top of the application directing consumers to specific pages for each of Disney's major brands: Disney, Pixar, Marvel, Star Wars and National Geographic. And like Netflix, users will be able to download the content and access it offline.
Offerings once available on Netflix will now move exclusively to Disney+, with "Captain Marvel" being the first new major release to be available solely on the product. And on top of popular "Star Wars" and Marvel films, Disney is creating custom content for its streaming service based on those universes and others. Some of those offerings will be available immediately, while others will be rolled out once the product launches.
The company is working with device partners to offer the service on a variety of platforms. Currently, Disney has deals with RokuTV and PlayStation 4, according to streaming president Michael Paull.
We're "confident by the time we launch we will have a full array of device platform partnerships in place," he told investors.
Disney plans to invest heavily in the product, positioning it as one of the company’s most significant business endeavors, alongside its film studio and theme parks.
The Burbank, California-based company expects to reach between 60 and 90 million subscribers by 2024, with the majority of customers eventually coming from outside the U.S. The cash investment for fiscal year 2020 will be roughly $1 billion, rising to the mid-$2 billion by fiscal year 2024. Disney expects operating losses to peak between fiscal years 2020 and 2022, eventually becoming profitable in 2024.
The "first couple of years post-launch [will] reflect the aggressive investments we are making because we want to set the business up for long-term success," CFO Christine McCarthy said.
Analysts are bullish on Disney’s prospects given its strong brand recognition and immense intellectual property, as well as the buffer provided by its other, profitable operations.
“If Disney misfires on how they put together this platform…they’re making a ton of money off of movies, and off of cruise ship, and off of the theme parks. So for them, this is not a binary outcome,” Trip Miller, managing partner at Gullane Capital Partners, told FOX Business. “They’ve got the luxury of time, they’ve got the luxury of a lot of free cash flow from their other businesses and this is just a broadening of that network."
One of Disney’s greatest strengths, analysts say, is its already existing network of loyal customers and the ability to cross-sell the new streaming service through its movies, theme parks and other avenues.
“They’ve got multiple ways to get money out of your pocket and that’s a tremendous edge for them," Miller said.
Another advantage over competitors like Netflix and Amazon is the company’s ability to include sports offerings, given its ownership of ESPN and separate streaming platform ESPN+, a $5 a month service that Disney expects to become profitable in the next few years.
One of the major questions among analysts and investors heading into Thursday’s meeting was the future plans for Disney’s new majority stake in Hulu, gained as part of its purchase of Fox assets.
While Disney+ will be an ad-free service that encapsulates the company’s family-friendly brand, executives positioned Hulu as a digital advertising haven – a sector the company says has the potential to reach $50 billion in annual earnings by 2020 -- that will house the more edgy content.
No other platform can offer the “viewability, brand safety, targeting and measurement, all inside the [best] storytelling and the largest selection of shows anywhere [of Hulu],” said CEO Randy Freer.
In 2018, ad revenue at the platform grew 45 percent, while the client base grew 50 percent to 2,500. That could grow to more than “10,000 unique advertising partners while more than doubling ad revenue over the next few years,” Freer said.
Disney expects Hulu to reach as many as 60 million subscribers by the end of fiscal year 2024, with profitability coming within the same time frame.
Disney plans to bundle Disney+, Hulu and ESPN+ together at a discounted price, but did not disclose what the cost would be.