Disney+ is a direct-to-consumer OTT streaming video service, which Disney Chair and CEO Bob Iger says allows the company to maintain a tighter brand affinity with its customers than ever before. The deep relationship to a broad line up of Disney’s brands means fans are more likely to see their films, watch their shows, visit the theme parks where they can visit those worlds, and buy the merchandise and apparel that allows them to show their brand affinity.
To say Disney+ is just a streaming service is a bit of a misnomer. It’s a gateway drug into the Disney lifestyle.
Where will you be able to find Disney+?
If you have a smart TV you will be able to download an app for it. If not you’ll need a Roku, Chromecast, or similar device. Yesterday Disney CEO Bob Iger said they’re close to a deal to appear on Apple TV too, even though that’s a rival platform. There will be mobile apps for your phone or tablet as well.
What does OTT mean?
It stands for Over the Top as in something that comes on top of traditional television broadcast or cable services, usually driven over the internet. The growth of the OTT market means its easier than ever for families to unbundle from cable packages and maybe go as far as cutting the cable cord all together. Disney+ and ESPN+ is Disney waking up to consumer demands as much as it is a strategic long term move for Disney.
With Disney+ being for the family friendly brands, Hulu will continue to be home of titles that are targeted at lovers of subject matter that’s a bit more adult. Now that Disney owns controlling interest in Hulu, Iger says Disney will likely provide a package price for users who want both Disney+ and Hulu.
How and when will Disney+ make money for The Mouse?
In its investor presentation, Disney said it will sign up between 60 million to 90 million consumer by the end of its 2024 fiscal year (with about 20 million to 30 million of those located in the USA). It also expects Hulu subscriber base to continue to grow to around 60 million. Those seem like huge numbers, but there’s also a large cost to build, program, and run a streaming service.
Wall Street thinks Disney is on the right path here and rewarded Walt Disney Company stock with a 12% increase after the Investor meeting on Thursday. Netflix, the chief rival to Disney+, on the other hand took a big hit.
This is interesting because it’s a multi-year ramp up to profitability for Disney+. Netflix is profitable, but is also borrowing a lot of money to make original programming. Thanks to giant profits Disney probably won’t have to borrow, but it will have to spend billions to compete. If Disney is unable to convince enough people to subscribe then the value proposition changes for the company.
I’m pretty confident this won’t be a problem for Disney+. I think the biggest problem will be maintaining an affordable price to compete against a growing list of competitors. That list already includes Netflix, Apple, Amazon, CBS all-access, YouTube, AT&T, Warnermedia, and a ton of smaller bundles and services. As we saw with the price increase at YouTube this week, the consumer awareness of price to value is high. People dropped their cable services because they want choice, but they also want savings. That said, Netflix has been able to raise their prices over the last few years and still managed to grow. If the Disney+/Hulu bundle is within a few bucks of Netflix that’s a real powerful competitor.
As Iger continues to say, great storytelling is Disney’s best asset. Their purchases of Pixar, Marvel, Lucasfilm were all because of the great storytelling at those studios was a match for Disney. How the Fox purchase works out remains to be seen, but that was mostly existential reasoning. If Disney hadn’t grown itself, it would risk being consumed by competitors.
While The Walt Disney Company may be making a big bet that consumer demand will continue to shift toward unbundled streaming services and away from its very profitable packaged sports and entertainment cable channels, it isn’t changing its other core businesses, mainly theme parks, movies, and related merchandise. Those all remain very profitable and with the acquisition of 20th Century Fox will continue to drive Disney to grow to a potential $100 billion a year in revenue. With a 20% profit margin goal, that will keep investors happy for a long time to come.
Now that you’ve had a day or two to digest Disney’s big reveal of its Disney+ streaming service, how do you feel about the product mix it will deliver and the price point of $6.99 a month or $69.99 a year?