Disney’s Brave Adventure Takes the Mouse—and Fox—Into the Stream


21st Century Fox and Disney merger

For a brand built on storytelling and adventure, Disney is embarking on a massive adventure itself, crossing over from the relative safety of tickets (theme parks) and traditional distribution for its entertainment channels and programming, to a more lucrative subscription and streaming model that will allow the company to defend its castle against the threat of Netflix. By redefining its corner of entertainment industry, Disney is blowing up the castle it built to save its global kingdom.

The Walt Disney Company is wielding its unique magic as CEO Bob Iger promotes the vision for the company’s acquisition of most of the assets of 21st Century Fox—which will bolster its planned Disney-branded streaming service (which some wags are calling “Disneyflix” in response to Netflix). Boding well for those plans to package and stream its older and newly acquired content are the positive results from ESPN+, the direct-to-consumer (DTC) streaming service that launched in April.

“Consumers are picking and choosing from all the options in the market to create their own personalized mix of content,” Iger said on its quarterly earnings call with analysts on August 7, in which he previewed the 2019 streaming service launch, which will include several exclusive series and every film in the Star Wars, Marvel Entertainment, Pixar Animation Studios and Disney Animation universes.

It’s a brave but necessary move for the entertainment behemoth, which has dominated screens worldwide via pay TV and cinemas—two businesses that are in decline. Of the dozen films with the largest worldwide box-office take since 2010, Disney released eight—so its move into streaming distribution, directly to consumers, is a game-changer for the Disney company and the entertainment industry, which has been up-ended by the rapid global success of Netflix. And the future of entertainment will be streamed.

“We continue to move full steam ahead on our direct-to-consumer strategy empowered by our strategic purchase of BAMTech, which allowed us to enter this dynamic space quickly and effectively,” Iger told analysts. “We have always believed we have the brands and content to be extremely competitive and to thrive alongside Netflix, Amazon and anyone else in the market.”

With Moviepass already riling exhibitors, a future where Disney releases its own content is bad news for cinema owners and multichannel pay TV distributors. But as The Atlantic puts it, “To save the kingdom… Disney may have to blow up the castle.” After all, Disney led the domestic US box office this year, led by Avengers: Infinity War taking in more than $2 billion worldwide to become the fourth highest-grossing film in history, while “Incredibles 2” topped $1 billion in ticket sales globally.

“Adding the Fox brands and creative assets … make our DTC products even more compelling for consumers. It gives us the opportunity to be associated with and to expand iconic movie franchises like Avatar, Marvel’s X Men, The Fantastic Four, Deadpool, Planet of the Apes, Kingsman and many others.”

Expanding more of its owned content via the Fox deal to program its own streaming channels makes sense in a world where mobile- and digital-first consumers are demanding on-demand programming across devices.

“We continue to transform our media businesses to take advantage of new technology, as well as the changing consumer trends that are reshaping the media and entertainment landscape,” Iger said.

“Smaller digital bundles have become a rapidly growing part of the MVPD (multichannel video programming distributor) universe. And our early decision to make our high-value channels widely available across these new services certainly added to their consumer appeal.”

Iger made it clear that the over-the-top or OTT streaming is Disney’s “biggest priority” in 2019 and outlined reasons why:
“There will be a significant amount of support given across all of our assets to see to it that that product launches successfully,” with marketing efforts concentrated on “reaching the core Disney fan, and we certainly have a number of different company touch points to do that.”

It may have less content than Netflix at launch—but will be cheaper, too. “We’re going to walk before we run as it relates to volume of content because it takes time to build the kind of content library that ultimately we intend to build,” Iger said.

With brands like Disney, Pixar, Marvel, Lucasfilm and Fox-owned powerhouses like National Geographic, “We feel that it does not have to have anything close to the volume of what Netflix has because of the value of the brands and the specific value of the programs that will be included on it.”

Programming in the pipeline includes a live-action Star Wars series, new episodes of the animated series Star Wars: Clone Wars, spinoffs of Disney Channel’s High School Musical and Pixar’s Monsters, Inc., live-action movie versions of animated classics including Lady and the Tramp and Mulan and a film version of its Jungle Cruise park attraction (which is already having a bumpy ride).

Disney won’t combine its OTT services but may bundle them at a discounted rate. “We don’t really want to go to market with an aggregation play that replicates the multichannel 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,” said Iger.

Clearly, exclusive content is the name of the game. “We don’t see the need to rush because the market will pass us by, simply because the only place people are going to be able to get Disney, Pixar, Marvel, Star Wars original product is going to be on this app. And so, we believe whenever we launch, it will be attractive.”