Can Disney’s own video streaming trump Netflix?
Yes, Disney is planning to end the its distribution deal with Netflix and launch its own streaming service, the company announced today. It intends to launch the service in 2019.
How can Disney position its entertainment as “Must have” vis-a-vis rivals?
Will Fox’s assets help?
Wall Street Journal Article – Handout – 8/8/2018 (Erich Schwartzel)
· Disney’s high-stakes plan to fight back: the company’s own direct-to-consumer offerings and a pending $71.3 billion acquisition of 21st Century Fox Inc.’s entertainment assets.
· “Consumers are picking and choosing from all of the operations in the market” – Robert Iger (Disney Chief Exec.)
· Mr Iger won a bidding war with Comcast Corp. for the Fox assets, which include the company’s film and television studios, as well as media company Star India and the Sky PLC pay-television operator. The deal has already been approved by U.S. authorities at the Justice Department but still needs clearance from several foreign jurisdictions.
· Could traditional television providers such as Comcast (owner of NBCUniveral) be looking to do the same thing and monopolize the market?
· Expects to close the deal next year, will put “Avatar” and “The Simpsons” under the same roof as Mickey Mouse, Luke Skywalker and “The Avengers.” Those brands will then be used to sell consumers on the Disney-branded streaming service set to launch in late 2019.
· Hopeful that the strength of Disney’s brand and characters will allow it to compete in a crowded streaming market and “thrive alongside Netflix, Amazon and anyone else.”
· Not looking to demolish competition, but looking to remodel television (predicting the future of television) and perhaps part of creating a changing future.
· Direct-to-Consumer will put Disney in charge of 3 separate digital services. ESPN Plus (sports streaming, launched earlier this year), Hulu (Disney will become majority owner w/ Fox deal b/c Hulu is a joint venture with Disney, Fox and Comcast’s NBCUniversal).
· “They will basically be designed to attract different tastes or different audience demographics”
· The company might bundle the subscriptions for customers who want all three.
· Includes “Star Wars” and “High School Musical,” will have fewer titles than an “aggregation” service like Netflix. Will instead rely on consumers’ perceived demand for the company’s franchises not to have to have close the volume of what Netflix has b/c of value of the brands.
· The company’s Fox Searchlight label, responsible for recent best-picture winners (12 Years a Slave + The Shape of Water), will likely produce for streaming services with original film and television projects.
· Will still continue to produce traditionally (through series and theatrical releases.
· Control of Sky (European pay TV operator) remains an open question, b/c Comcast still wants control.
· Disney wants to win Sky b/c it’s one of Fox’s international assets that fit into Disney’s “global growth strategy.”
Wall Street Journal. July 28-29, 2018. (Erich Schwartzel & Keach Hagey)
· Fox deal: $71 billion
· Waiting for approvals from more than a dozen international territories, including the European Union and China.
· The Justice Dep. approval came on the condition that Disney divest itself of Fox regional sports networks that compete with its own ESPN.
Wall Street Journal. July 30, 2018. (Elizabeth Winkler)
· Disney has said it plans to launch a streaming service for children and another service for adults.
· Would people be willing to pay for a children only streaming service?
Online Article “Disney says its new streaming service won’t rival Netflix”. Mae Anderson, Associated Press. Aug. 7, 2018.
· Won’t try to compete directly w/ Netflix & Amazon, but will focus instead on quality – namely original programs.
· With the Disney branded entertainment service, Disney will have more control over its movies & TV shows from creation to distribution. That ultimately give Disney more date to gauge its audience.
· Price will reflect a lower volume of shows and movies
· May be cheaper than most streaming services
· The one business that saw a drop in revenue was also Disney’s smallest segment, Consumer Products and Interactive Media.
Can Netflix Copy this Key Disney Strategy? (article sent by professor) https://www.fool.com/investing/2018/09/09/can-netflix-copy-this-key-disney-strategy.aspx
· Netflix hired Christie Fleisher as head of consumer products. Disney’s consumer products business is a significant source of revenue and operating profits for the company. Fleischer previously oversaw merchandise for Disney’s theme parks, stores, and licensing deals. It brought in Fleischer to help make monetize that IP and potentially offset some of the additional costs associated with producing originals in house.
· Disney’s consumer product and interactive media segment brought in $3.5 billion of Disney’s $45.1 billion in revenue through the first nine months of the fiscal year. It’s the smallest of its divisions, but it produces a higher operating profit margin than Disney’s other businesses.
· Numbers for Disney: operating margin (YTD F2018)
· Consumer products and interactive media: 37.7%
· Media Networks: 27.5%
· Parks & Resorts: 23.9%
· Studio entertainment: 30.4%
· Being able to sell merch. Based on the characters and stories of big-budget films & series can help offset some of the costs associated with producing them.
· In the long run, producing originals in-house actually saves Netflix money versus hiring out a third-party production company. It also gives it the ability to license and merchandise the intellectual property instead of allowing another company to retain those rights.
· The idea of selling merchandise associated with films is Disney’s big profit center… can Netflix or Twitch do a similar strategy?
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