Disney bets its $6.99-a-month streaming service will be a game-changer
Walt Disney Co. stock surged Friday to a record level after the entertainment company offered more information than expected about its bold plunge into the burgeoning streaming video market.
Disney’s stock jumped 11.5% to an all-time high of $130.06 a share, also marking its biggest one-day jump in a decade. By contrast, rival Netflix shares fell 4.5% to $351.14 on Friday.
The leap in Disney’s share price follows Thursday’s investor meeting on the company’s Burbank lot where executives shared plans for Disney+, an ad-free subscription service that Disney will launch Nov. 12, charging $6.99 a month or $70 a year.
“Disney+ could be a potential game-changer in a rapidly evolving streaming landscape, with possible bundling options with its complementary ESPN+ and Hulu streaming offerings,” wrote CFRA analyst Tuna Amobi in a research note.
During its 3½-hour presentation, Disney gave investors the first real glimpse into the company’s streaming strategy, which is fueled by a cadre of powerful franchises such as Marvel, “Star Wars,” Pixar and “High School Musical.”
The Disney+ platform is an attempt to compete with Netflix Inc. and others in the streaming arena as audiences increasingly turn to online services. The offering is part of Chairman and Chief Executive Bob Iger’s broader strategy to adapt to changes in the media landscape, as people increasingly eschew traditional cable television packages and expect more films to be available in the home.
In its first year, Disney+ will host more than 7,500 television episodes, 400 older films and 100 recent theatrical releases, the company said. By the fifth year, Disney expects to annually produce 50 original series, including returning seasons, and at least 10 original movies, documentaries and specials.
Disney plans to spend more than $1 billion on original content in fiscal 2020 for the streaming service. Disney+ is projected to have 60 million to 90 million subscribers, mostly from international markets, and be profitable by 2024, executives said.
“The aggressive numbers … are a direct result of us being all in from the beginning,” Iger said.
The investor day came less than a month after Disney completed its $71.3-billion acquisition of 21st Century Fox, including its movie and TV studios, cable networks and Fox’s 30% stake in Hulu, giving Disney 60% of the streaming service. The deal was largely driven by Iger’s desire to own more intellectual property to compete with streamers that are spending billions each year on their own original content.
“While this is an exciting time, it’s also a challenging time,” Iger said. “The combination of Fox and Disney unites businesses with the same mission and creates a team of talented, experienced and visionary leaders that will ... enable our 96-year-old company to thrive and to grow [and] to be more relevant than ever as we enter our second century.”
The gathering of investors, analysts and journalists was held in a cavernous soundstage on the Disney lot that was converted into an auditorium. The stage was built in 1949 and used to shoot the original “Mary Poppins” and “Pirates of the Caribbean.” “Star Wars” Stormtroopers greeted attendees at the door. A giant screen featured a projection of sparkling plus signs resembling pixie dust.
Disney kicked off its presentation with sizzle reels showing clips of Disney films, ABC news clips, and the building of Disney’s theme parks, along with such Fox properties as “The Shape of Water” and “Avatar.”
Kevin Mayer, chairman of Disney’s direct-to-consumer business, took the audience through a virtual tour of its service, which is organized into five distinct brands: Disney, Marvel, Pixar, “Star Wars” and former Fox property National Geographic. Disney’s content will be available for consumers to download onto their devices for offline use, Mayer said.
“The fact that we have the brands that matter is the single biggest differentiator for our service,” Mayer said.
Disney took pains to showcase the company’s array of popular brands that will be funneled into the service. Disney+ will be the permanent home of animated films, including classics such as “Snow White and the Seven Dwarfs,” “The Little Mermaid” and “Bambi.” It will have Pixar films, Marvel movies such as “Captain Marvel” and the “Star Wars” film saga. Also joining the app will be 250 hours of National Geographic content and 5,000 episodes of Disney Channel and Disney Junior programming.
Some Fox film and TV properties will have a presence, too. The company said the first 30 seasons of Fox’s “The Simpsons” will be available on the service. The Fox network will continue to air first-run episodes of the iconic animated TV show. Fox properties including “Malcolm in the Middle” and “The Sound of Music” will live on the app.
Addressing the relatively low $6.99 cost of the ad-free service, Iger said, “This is our first serious foray into this space, and we want it to be available to as many people as possible.”
Jennifer Lee, chief creative officer of Walt Disney Animation Studios, said the service will have a documentary series about the making of the upcoming film “Frozen II.” Pete Docter, Lee’s counterpart at Pixar Animation Studios, said Bo Peep of the “Toy Story” franchise will get her own short film called “Lamp Life.” The company is also making a series called “Forky Asks a Question,” featuring a new character from “Toy Story 4.”
Marvel Studios President Kevin Feige teased original shows for the service, including “WandaVision” and “The Falcon and the Winter Soldier,” featuring characters and actors from the Marvel feature films.
Lucasfilm’s Kathleen Kennedy brought Jon Favreau onstage to talk about “The Mandalorian,” the upcoming “Star Wars” series about a lone gunman on the outer edges of the galaxy, set a few years after the events of “Return of the Jedi.”
And Sean Bailey, who heads Disney’s live action film production, touted “Noelle,” a holiday comedy starring Anna Kendrick as the daughter of Santa Claus, and the studio’s live-action retelling of “Lady and the Tramp.” Bailey promised that the productions for the service would be “treated with the same love and care as our theatrical titles.”
Disney executives also gave presentations on Disney’s existing direct-to-consumer businesses, including ESPN+ and Hulu. Mayer said that the company would “likely bundle” Disney+, ESPN+ and Hulu for a discount.
Mayer briefly touched on plans to expand its direct-to-consumer offerings globally, including introducing ESPN+ in Latin America. He also said the company planned to roll out Hulu internationally but did not offer details. Hulu has 25 million subscribers in the U.S.
Additionally, Disney highlighted Hotstar, an advertising-supported streaming service it acquired from Fox. Though few people outside India know about Hotstar, the platform has 300 million monthly users.
Hotstar is already home to more than 100,000 hours of Indian dramas and the service provides cricket matches in Indian languages, not just in English. Star and Disney India Chairman Uday Shankar said that India is ripe for growth because the country has more than 600 million consumers younger than 25 — the largest youth demographic in the world.
The confab was viewed as a pivotal moment in the battle for streaming audiences. Netflix has 150 million subscribers and puts out a rich variety of prestigious original shows, such as “Russian Doll” and “Glow.”
But Disney’s advantage is its deep library of family-friendly movies and programming that kids are apt to watch repeatedly. Disney is also betting it can draw Marvel and “Star Wars” fans hungry for new lore in each series.
“While the direct-to-consumer space is growing, it is also becoming a crowded marketplace in which brands matter more than ever,” Mayer said.
Disney’s presentation ups the game for rivals entering the streaming market.
Apple Inc. last month talked up its own programming slate at an event in Cupertino, Calif., featuring heavyweights Steven Spielberg, Oprah Winfrey and Reese Witherspoon. That showcase largely fell flat in Hollywood because of a lack of specifics and footage.
AT&T Inc.’s WarnerMedia, which owns “Game of Thrones” network HBO and film and TV studio Warner Bros., is also planning its own service.
During his remarks, Iger gave a shout out to the vision and creativity of the company’s founder, Walt Disney, and added that current corporate leaders were building on the legacy with the acquisition of the Fox assets and the push into digital distribution.
“Borrowing from one of Walt’s greatest strengths, it takes courage.” Iger said.
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