As noted previously, Walt Disney has been gearing up for some serious digital disruption in the media market that’s become dominated, in perception at least, by the enfants terribles of Netflix and Amazon Prime. CEO Bob Iger has spent the past 18 months consolidating his assets - pulling back the rights to popular franchises, such as Star Wars and Marvel, in preparation for Disney launching its own digital streaming platform.
This week, as Disney turned in its quarterly numbers, there were clear indicators that the ‘phoney war’ that’s been in play to date is approaching its conclusion as Iger opened up in greater detail about the offensive to be expected in 2019 - Disney+:
Our Disney-branded service, which we're officially calling Disney+, will be in the U.S. market late next year, offering a rich array of original Disney, Pixar, Marvel, Star Wars and National Geographic content, along with unprecedented access to our incredible library of film and television content, including all of our new theatrical releases starting with the 2019 slate. We've already announced the robust pipeline of Disney+ original content currently in production, including The Mandalorian, the world's first live action Star Wars series written and produced by Jon Favreau.
As Netflix and Amazon Prime have pioneered, original, exclusive content will be a key leveraging factor for the new Disney push. Iger elaborated:
Animation will also be an integral part of Disney+. The service will be the exclusive home of the next season of the popular Star Wars animated series Clone Wars as well as a new series based on Pixar's beloved Monsters, Inc. franchise.
The Disney+ platform is also a perfect home for documentary series that will allow us to pull the curtain back and give people a behind-the-scenes perspective. We've got several docuseries currently in production, including an exclusive unprecedented look at Walt Disney Imagineering, featuring stories we've never really told before and images we've never shared.
Our studios are also creating a robust slate of original films exclusively for Disney+, including Noelle starring Anna Kendrick as Santa's daughter, a live-action version of Lady and the Tramp, and Togo, an adventure starring three-time Oscar nominee, Willem Dafoe.
Iger argues that Disney has learned valuable lessons from its launch of sports channel ESPN+ that will assist in the roll out of broader entertainment disruptor:
DTC (Direct to Consumer) continues to be one of our top priorities. Our strategic purchase of [streaming tech provider] BAMTech allowed us to enter this arena quickly and effectively, as evidenced by our successful launch of ESPN+ six months ago. More than 1 million users have already subscribed. And we continue to see impressive growth…The early growth trajectory of ESPN+ is very encouraging. And we believe it bodes very well for our overall global DTC strategy.
And there will be technology innovations to come, promised Iger:
As with ESPN+, the launch of Disney+ will just be the starting point. We plan to continually elevate the experience, and enhance the value to consumers with a constant pipeline of exclusive new content as we move forward. I visited BAMTech last week and saw an early prototype of the app which will feature elegant navigation, personalization and content, segmented primarily by our core brands namely Disney, Pixar, Marvel, Star Wars and the soon to be added National Geographic. It will blend library product with original content under these five brand banners and we are confident it will be a compelling consumer proposition.
The other digital tech factor to take into account is Disney’s plans for Hulu, in which it is a stakeholder with 21st Century Fox, AT&T and Comcast. But assuming Disney’s $71.3 billion takeover of 21st Century Fox gets necessary regulatory approval - and the European Union just gave it the green light - then Disney will become the de facto owner, as Iger noted:
We'll own 60%, which will give us considerable say in how Hulu is run…we think that given the success of Hulu so far in terms of subscriber growth and the relative brand strength and other things too like demographics, we think there's an opportunity to increase investment in Hulu notably on the programming side.
With this acquisition comes not only some great IP, but some excellent talent..we aim to use the television production capabilities of the combined company to fuel Hulu with a lot more original programming, original programming that we feel will enable Hulu to compete even more aggressively in the marketplace.
I also think Hulu is attractive in many ways…If you look at the demographics of the people consuming off-network shows in Hulu, and you look at the demographics of the same shows on the network, you'll see what could be at times 20 years younger audience at Hulu. That's clearly attractive to advertisers, which I think has been somewhat under-appreciated about Hulu, in that it is a very strong play for advertisers, because it can offer targeted ads. It has great demos. And it's just a great user experience. The quality of the product, meaning the quality of the television programming is quite high.
Overall, it’s hard to escape the conclusion that Iger has moved his pieces on the board into all the right places so far. The only glitch in the plan was losing the bid for Sky to Comcast. That will have some ramifications for the International advance of Disney+, but not to any great effect, insists Iger:
You can't cry over spilled milk, so to speak. There's nothing we can do about it. We made a bid that we thought was an appropriate bid in terms of what we saw as value to our company. We would have loved to have had Sky, both because we believe in the asset and we thought it could have helped us in terms of introducing a direct-to-consumer service in the European market, but again, only at a price that made sense for us.
Without Sky, we are still planning on taking Disney+ out in Europe. We also plan working with Hulu to introduce Hulu in more international markets as well. It could possibly be that it takes us a little bit longer to penetrate some of these markets, but we believe in the product that we will be launching and we'll make sure that that product is tailored for the various European markets…we're going to be selective in terms of the markets that we choose initially, but we believe we're going to win.
All that remains now, aside from the final regulatory approvals over Fox, is to get the Disney+ app 100% complete, which should be relatively soon according to Iger:
I saw an iteration of the app last week and I was very impressed with it. It's not quite in ready for prime time, because it's still being iterated. It will be elegant, it will be very brand-centric, which will we believe add navigational features that typically don't exist in other platforms, namely that there'll be segments under the brand program, segments under the brands Disney, Pixar, Star Wars, Marvel and then National Geographic. So we think there'll be an elegance to it, an ease of use.
There is activity across the board at our company in terms of increased production investment specifically for this app. It'll take some time obviously to achieve the kind of scale we're going to need on a steady-state, because it takes time to make these products, particularly given the high production values that they will represent. But besides that, we think we're in great shape. We have a game plan in place to bring the product to market.
It's hard to not to believe Iger when he says:
We're going to be nimble as I think we've already evidenced by just the fact that we're going into the direct-to-consumer space as aggressively as we're going into it. We're looking at the marketplace. We're seeing disruption and we're reacting to it hopefully on a timely basis, so we can take advantage of the trends that we're all seeing today.
Netflix, Amazon - 2019 is the year the digital content platform wars get real.