Tech & Science: Disney is betting everything on its Disney+ streaming service - - PressFrom - United Kingdom
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Tech & Science Disney is betting everything on its Disney+ streaming service

20:05  08 november  2019
20:05  08 november  2019 Source:   qz.com

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Disney’s fiscal-year fourth-quarter earnings report was a good one for the entertainment giant. Shares were up about 4% in after-hours trading today (Nov. 7) after the company announced it beat expectations on earnings per share and revenue.

It was welcome news for the Mouse House as it recovers from an underwhelming third quarter, which it blamed on the challenges of integrating Fox’s entertainment assets. But Disney’s biggest test is yet to come. On Nov. 12, the company will launch its streaming service, Disney+, hoping to prove to investors — and the world — that it has a strong vision for the future.

“We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience,” Disney CEO Bob Iger said in a statement.

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As Disney’s traditional TV business deteriorates, the company is wagering its longterm future on streaming. Analysts expect that by this time next year, the service will have 15 million subscribers. By the end of 2024, Disney thinks it’ll bring in between 60 and 90 million global subscribers. (Netflix boasts about 150 million subscribers.)

While movie franchises like Star Wars and The Avengers earned all the headlines, cable and broadcast TV was long the backbone of the Disney business. In recent years, however, that business has suffered under increased costs and the effects of cord-cutting. ESPN, the company’s lucrative sports network, has lost 13% of its subscribers in the last five years:

This “media networks” segment of Disney’s business still brings in the most revenue — far more than its movie studios and theme parks. But it, too, has lost some of its luster. After nearly a decade of consistent revenue increases, the growth of Disney’s media networks segment has slowed considerably:

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(Disney said its media networks division grew again this quarter because of the consolidation of Fox’s TV properties, but was “partially offset by a decrease at our legacy operations.”)

And as much revenue as Disney’s TV operation accumulates, it’s becoming less and less profitable. Operating income has dropped 15% in just the last two years:

The company knows these trends are likely to continue as more consumers ditch their cable TV packages in favor of streaming services. Disney wanted to get into streaming earlier, but the streaming rights to many of its properties were tied up with other companies like Netflix.

As those agreements expire, Disney has stockpiled the rights to stream its shows and movies in preparation for the launch of Disney+. The purchase of Fox’s film and TV studios was also made with streaming in mind.

Iger has called Disney+ the biggest initiative in his 45-year tenure at the company, Deadline reported. “This is necessary,” he told the Hollywood Reporter earlier this year. “The risk would have been essentially maintaining a status quo approach to how we were managing our content.”

As media industry analyst Matthew Ball has noted, streaming isn’t just meant to be an ancillary component of Disney’s business: It’s going to be the business — the thing that ties everything else together.

“The real opportunity is how Disney+ enables and grows the rest of Disney’s businesses — from merchandise to live events, mobile games and more,” Ball wrote on his blog in March. “The service will allow Disney, for the first time ever, to know exactly who interacts with their content, how frequently and in what categories, and through which characters — as well as what these subscribers buy, at which (targeted) prices and when. This will be Disney+’s most important achievement, and the math shows why.”

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