Disney gave a few more clues about its forthcoming online service, due to launch in 2019. Speaking to analysts, Bob Iger, the chairman and chief executive of The Walt Disney Company, was enthusiastic about the pending acquisition of 21st Century Fox, but he was busy fielding questions about plans for online delivery direct to consumers.
Disney reported revenues of $15.23 billion for the quarter, with net income up 23% at $2.91 billion. Its parks and resorts business accounts for around a third of revenue and income. Consumer products and interactive media currently account for only 6.5% of revenue.
That said, the acquisition of 21st Century of Fox for over $70 billion in stock, and the potential purchase of the rest of Sky, is partly predicated on the need to increase scale to compete with the likes of Netflix.
Disney on its own has a market capitalisation of around $168 billion, while Netflix is apparently worth $150 billion.
The Disney chief executive said the company continues to move full steam ahead on its direct-to-consumer strategy, empowered by its strategic purchase of BAMTech. He said it was on track for a late-2019 launch of its Disney-branded online service, following the launch earlier in 2018 of its ESPN+ sports service. He declined to give any subscriber numbers for the ESPN+ service, saying “It’s a marathon; it’s not a sprint.”
He signalled that the Disney app would not have anything close to the volume of programming that Netflix has and will be priced accordingly. However, he said it would be the only place people would be able to get original Disney, Pixar, Marvel or Star Wars product. That said, a number of previous productions and those that will be made in 2018 are still encumbered by licensing arrangements with other parties, like Netflix, although starting in 2019, the studio movie slate will be free of such arrangements.
He also reminded analysts that after the close of the deal with 21st Century Fox, Disney will own 60% of Hulu, “so that will fit in very significantly to our app strategy”.
“We don’t really want to go to market with an aggregation play that replicates the multi-channel environment that exists today because we feel consumers are more interested in essentially making decisions on their own in terms of what kind of packages that they want,” he said.
So there will be a sports play, a family-oriented Disney play, and Hulu. “They will basically be designed to attract different tastes and different segment or audience demographics.” If a consumer wants all three, ultimately, we see an opportunity to package them from a pricing perspective.
He said he did not see going direct to consumer complicating negotiations with primary distributors. “I think there is a reality that is set-in in the distribution side of the business that the business is changing, that consumer habits have changed, and that the over-the-top SVOD product is here to stay and is real, and is probably going to continue to either compete with the more traditional platforms or complement the more traditional platforms.”
Nevertheless, going direct to consumer will inevitably create channel conflicts with existing distributors. Disney needs to be seen to be taking online delivery seriously, while at the same time using strategic acquisitions to reinforce its current position with additional brand properties and traditional distribution channels.