Disney+ has been held up as a “Netflix-killer” by many media pundits. But it’s by bundling Disney+, ESPN+ and Hulu that Disney will drive enormous growth across its entire business. The three streaming services, harnessed to Disney’s marketing machine, will drive traffic to theme parks, sales of merchandise, and Disney’s growth over the next decade.
Several executive presentations over the past month have revealed new details of Disney’s streaming strategy. The company’s executives introduced Disney+ at the 2019 Investor Meeting and CEO Bob Iger added more details at last week’s MoffettNathanson Media and Communications Summit. Based on these sources, we’ll take a look at how Disney+ is about much more than competing with Netflix.
Disney’s Streaming Trifecta
Although the three direct-to-consumer streaming services will work closely together, Disney is keeping them as standalone products. “We feel that consumers should have more flexibility,” Iger told investors, adding that “giving them [a single] fat bundle… would not be the right thing to do in this space.”
The chairman of Disney’s direct-to-consumer division, Kevin Mayer, added that the three streaming service were “each built for a specific target audience, each offered as a standalone service, which we will likely bundle at a discounted price to create even more value for consumers.”
Disney+ will offer a wealth of family-friendly content from Disney and its various production houses for only $7 per month. The catalog source content from five core properties: Disney, Marvel, National Geographic, Pixar, and Star Wars. In addition, Disney+ will include The Simpsons and other family-friendly content from the various Fox studios.
Agnes Chu, the head of content for Disney+, told investors that the service will launch with “more than 7,500 episodes of television, over 400 library titles and over 100 recent theatrical film releases.” That will include 25 original series and another 10 movies and documentaries.
By 2024, Disney+ will have an on-going production slate of 50 original series as well as 10 feature-length productions every year.
Disney launched its ESPN+ subscription service last year to give sports fans more of the content they want. And sports fans responded, swelling ESPN+’s subscriber base to more than 2 million.
The $5 monthly subscription offers more of the sports that the main ESPN channels carry as well as “underserved” sports like college lacrosse and international cricket. ESPN+ has also added pay-per-view options like UFC events.
The purchase of Fox and its recent deal with NBCUniversal has given Disney full operational control of Hulu and the power to direct its future. That future, however, will be much like its past, offering subscribers access to current-run TV shows from the major broadcast and basic cable channels.
For as little as $6 per month, Hulu subscribers can watch full seasons and the latest episodes with limited commercial breaks. An additional monthly fee will even remove the commercials.
In 2017, Hulu launched its own over-the-top live TV streaming service. Hulu with Live TV costs $45 per month and includes more than 60 TV channels.
“So if a consumer wants sports,” Iger summarized, “they can have a pure sports buy [in ESPN+]. If they want more adult-related programming, they can buy Hulu. And if they want [family-oriented programming], there’s Disney+.”
Bundling More Than Services
Each of these three streaming services will operate independently, but Disney plans to make combining the services very attractive to the consumer. Disney hasn’t discussed what the bundle discount will be. However, the three services are already extremely affordable. At full price, Hulu’s on-demand service, ESPN+ and Disney+ would add up to $18 per month — even less with annual subscriptions.
“If they want sports and Disney+ services, great,” Iger said at the MoffettNathanson event. “If they just want sports and just want Hulu, they can do that. They can pick and choose and do so with relative ease.”
ESPN+ and Hulu with Live TV, for example, are a natural pairing. Hulu with Live TV includes ESPN’s seven basic cable channels. Sports fans will probably jump at a special offer for the extra sports content that comes with ESPN+.
Yet the opportunities for bundling aren’t limited to the three streaming services. “If someone has bought Disney+ and we know they are a huge Star Wars fan,” Iger explained, “we may be able to figure out how to give them discounts on buying Star Wars goods or visit [the new Star Wars theme park] Galaxy’s Edge.”
This is the true core of Disney’s direct-to-consumer strategy: the ability to gather customer data and market the full range of Disney products. “The ability to integrate advertising sales now across all traditional and non-traditional platforms will be a big deal,” Iger said.
Forrester Research analyst Jim Nail told USA Today that the cross-merchandising potential “will be a far more interesting kind of ‘bundle’ to watch.”
Don’t Bet Against the Mouse
The open question remains whether consumers will pony up the cash for yet another streaming service. Cord-cutters are already paying for multi-channel streaming services like Hulu + Live TV, at a tune of $65 per month. While they do get additional features, like cloud DVR, a digital TV streaming guide, and simultaneous streaming, the costs add up. The proliferation of walled-garden streaming services, each with their own original content, has many talking about subscription fatigue.
But Disney executives are optimistic. CFO Christine McCarthy told analysts they “expect Disney+ to have between 60 million and 90 million subscribers around the world by the end of fiscal 2024.” As many as 30 million of those subscribers will be in the United States.
The dozens of new episodic and feature-length titles coming to Disney+ is one reason for the optimism. McCarthy explained that Disney will spend about $1 billion on new content in the coming year, rising to $2 billion by 2024.
But it’s the well-oiled Disney marketing engine that will drive the success of Disney+. Ricky Strauss, head of content and marketing Disney+, outlined for investors how every part of the company will promote Disney+. The theme parks, cruise lines, retail stores, consumer products operations, TV channels and streaming services will spread the Disney+ message to 100 million households across the United States.
“There truly is no bigger priority for The Walt Disney Company going forward,” Strauss said. “We will be executing a synergy campaign of the magnitude that is unprecedented in the history of The Walt Disney Company.”