The Disney (DIS) streaming service is going for quality over quantity. CEO Bob Iger offered up some key details late Tuesday about the strategic direction of the direct-to-consumer entertainment platform, which is slated to debut in late 2019.
XDisney Streaming Service: Key Details
Essentially: He does not plan to flood it with content for the launch. He does not want to mimic existing aggregation-style digital streaming bundles. And he is not particularly worried about Netflix (NFLX), because Disney's intellectual property portfolio is robust.
"Because the Disney app will feature Pixar, Marvel, Disney — ultimately National Geographic will be a contributor — Lucasfilm, 'Star Wars,' 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," said Iger, responding to an analyst question about Disney's strategy in relation to Netflix.
Disney, he said, doesn't have to be in the "volume game." But Iger was quick to add that this was not a knock on the quality of Netflix's content.
"That's not in any way suggesting that Netflix isn't in the quality game," he said. "There's a lot of quality there, but they're also in the high-volume game. And we don't really need to do that."
Netflix, Amazon (AMZN) Prime Video and Hulu are the streaming heavyweights currently on the market. But Disney really only has two competitors in streaming, since its $71.3 billion acquisition of 21st Century Fox's (FOXA) entertainment assets gives it a majority stake in Hulu.
Disney's approach to populating its streaming service echoes its movie release schedule. The Mouse only had eight theatrical releases in 2017, yet still dominated at the box office by ticket sales. No. 2 Warner Bros and No. 3 Universal, by contrast, released 18 and 14 movies in theaters last year.
Fan Service Provider And Gatekeeper
Giving the fans what they want is a priority for the platform.
"What we want to do is: We want to make sure when we launch it is viewed as a quality product, that we're serving the fans particularly of Marvel, Pixar, Disney and 'Star Wars' well, and that the price that we're charging reflects the value that we're delivering," said Iger on the call.
What he doesn't want to do is replicate a multichannel cable bundle that looks like the kind of product that's already out there. Consumers are more interested in making their own decisions about what kind of packages they want, he said.
But Iger didn't rule out potential for the family-friendly Disney streaming service to be purchased as a bundle with Hulu and ESPN+ in the future.
Disney is reportedly spending tens of millions of dollars per original TV series or movie for its new streaming platform. And its ability to play gatekeeper may prove to be a powerful competitive advantage for its iconic brands. Iger said that the app will be the only place for viewers to access certain Disney, "Star Wars," Pixar and Marvel content.
When an analyst prodded the chief executive about older Disney content — Turner holds the rights to the original "Star Wars" trilogy and the prequels until 2024, noted Bloomberg recently — Iger responded that "as rights become available or as we're able to negotiate for rights to bring back, you'll see them on the service and so on and so on."
He also made clear that the upcoming studio slate is not tethered to licensing deals, and all of those movies will ultimately join the streaming app. The upcoming theatrical releases include "Captain Marvel," "Dumbo," "The Lion King," "Artemis Fowl," "Jungle Cruise" and more sequels from "Star Wars," "Avengers, "Toy Story" and "Frozen."
There will be plenty of original content as well, including two new "Star Wars" TV series. Iger has previously promised four to five exclusive feature films a year for the streaming service, and the New York Times recently reported that nine films are currently in development or production.
But Disney Earnings, Sales Disappoint
Still, earnings and sales disappointed investors after the close Tuesday, initially sending shares of the media titan downward. Disney stock briefly pared after-hours losses amid talk of the upcoming Disney-centric streaming platform and Iger's enthusiasm for the opening-quarter performance of streaming sports service ESPN+.
Disney earnings of $1.87 a share and revenue of $15.228 billion both missed views for $1.97 in EPS and $15.49 billion in revenue.
The media networks segment, which includes ESPN, grew revenue by 5% to $6.16 billion. Losses at streaming technology provider BAMTech weighed on the unit's operating income amid the April launch of ESPN+.
Parks and resorts revenue rose 6% to $5.19 billion. Higher spending by U.S. park visitors — driven by increases in ticket prices and daily hotel room rates, as well as increased food, drink and merchandise spending — lifted operating income.
Studio entertainment revenue saw a 20% pop to $2.88 billion, as Marvel's "Avengers: Infinity War" and Pixar's "The Incredibles 2" buoyed the division.
Meanwhile, sales in the consumer products and interactive media unit declined 8% to $1 billion.
Shares sold off 1.4% to 114.88 on the stock market today, after hitting the highest level since November 2015 on Tuesday. Recall that the summer of 2015 saw a sector-wide media meltdown after Iger disclosed modest subscriber losses at ESPN, prompting concerns about the state of the pay-TV subscriber.
While he had "relatively modest expectations" for the ESPN+ sports streamer, and the app is still young, Iger said conversions to paid subscriptions have so far been "strong" and subscriber growth is exceeding expectations. He would not disclose specific user numbers, however.
"We feel really good about how we're positioned and we'll continue to look opportunistically in terms of what rights will be available," he said.
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