DISNEY’S THEME parks may be closed and its cruise ships docked, but the entertainment giant’s Disney+ streaming service has been one of the great success stories of the year of lockdown. Launched 13 months ago with a target of reaching 60m-90m subscribers by 2024, it had hit that mark by this summer, as self-isolating audiences happily shelled out $6.99 a month for access to the deep back-catalogue of Hollywood’s biggest studio.
Wall Street lapped it up. Despite a net loss of $710m in the three months to September, mainly owing to those closed theme parks and docked cruise ships, the growth of Disney+ propelled the company’s share price back to where it had been before the pandemic. If the stockmarket had any lingering doubts, it was over the emptiness of Disney’s pipeline of new shows. Aside from “The Mandalorian”, a “Star Wars” spin-off, and “Hamilton”, a Broadway musical, the service has had few original hits, relying heavily on the Disney archives. The company allocated only about $2bn for fresh Disney+ content this year. Netflix, the world’s biggest streamer, with 195m subscribers, earmarked $17bn.
In a presentation to investors on December 10th Disney dispelled those doubts once and for all. It announced a content binge designed to put it on a par with Netflix—and to shift the company’s focus sharply towards streaming. This was just what the presentation’s audience of market analysts wanted to see. Disney’s share price leapt by almost 14% the next day, reaching an all-time high and adding $38bn to the company’s stockmarket value (see chart).
Disney said that in the next few years it would release around ten more “Star Wars” series, ten based on the Marvel comic books, 15 other new original series and 15 feature films, all going straight to Disney+. By 2024 its content spending on Disney+ will be $8bn-9bn; across all its streaming channels (which include Hulu, an entertainment service, and ESPN+, which shows sport) it will be $14bn-16bn.
As well as matching Netflix dollar-for-dollar, Disney is broadening its range of content in a way that will make the two streamers more direct rivals. Netflix has had recent hits with documentaries and reality shows such as “Selling Sunset” and “Floor is Lava”. Disney announced that a new service, Star—to be included with Disney+ in some countries and offered separately elsewhere—will carry a wider range of programming, including a new programme about the indefatigable Kardashian clan.
To help pay for all this the company plans to raise the subscription price of Disney+ by a dollar a month. But that dollar will be multiplied by what it now expects to be 230m-260m subscribers by 2024—more than treble its previous target. That should allow Disney+ to break even the same year, in line with earlier plans. Across all its streaming channels, Disney expects to have more than 300m paying subscribers by 2024. This could be enough to make streaming the company’s single largest business by revenues, notes Benjamin Swinburne of Morgan Stanley, a bank. It would also probably be enough for Disney to draw level with Netflix in subscribers. The “content tsunami” announced this week is “frightening to any sub-scale company thinking about competing in the scripted entertainment space,” wrote Michael Nathanson of MoffattNathanson, a media-research firm.
The spending spree will also worry cinema-owners. WarnerMedia, a subsidiary of AT&T, a telecoms group, shocked them last week with its announcement that in 2021 all its feature films will be released on its HBO Max streaming service on the day that they come out in theatres, which historically have had an exclusive run of a couple of months or so. The first movie to get this treatment, on Christmas Day, will be “Wonder Woman 1984” (shot partly outside The Economist’s London offices, though its journalists were, inexplicably, spurned as extras).
Disney, which makes far more money at the box office than any other studio, with seven of last year’s top ten hits in America, is not willing to go that far; “Black Widow”, its latest Marvel-superhero blockbuster, due out in May, is still to be shown first on the silver screen. But the notion is no longer a complete non-starter. Disney has announced that in March it will offer one of its lower-budget films, “Raya and the Last Dragon”, simultaneously in theatres and on Disney+, for a one-off fee of $30. Other productions are sure to follow. “Made for TV” is no longer a slur in Hollywood.
Source: Business - economist.com
