Details about Disney’s upcoming streaming service — especially the subscription price — sent the company’s stock price soaring in early trading today, with Variety reporting that shares were up more than 10% in morning trading while Netflix stock was down more than 3%.
The moves came after Disney announced Thursday that Disney+, which will launch in the U.S. on Nov. 12, will cost $6.99 a month — fairly close to half the price of a standard $13 Netflix plan.
“In fiscal 2020, the Mouse House will spend $1 billion in cash on original programming for Disney+, while it will have just under $1 billion in operating expenses, Disney CFO Christine McCarthy told analysts. Its spending on Disney+ originals is mapped out to rise to around $2.5 billion by 2024,” Variety reports.
The report notes that Disney is playing a “long game” — and Wall Street appears to approve.
Variety notes that Disney+, which will be fully subscription-supported, with no advertising, “is expected to sustain financial losses for its first four years of operation, before turning profitable by fiscal year 2024 (which starts in the calendar fourth quarter of 2023).”
Variety reports separately: “In the first year after its launch, Disney+ will include 7,500 episodes of current and off-air TV shows; 25 original series and 10 original movies and specials; 400 library movie titles; and 100 recent theatrical films release, according to Agnes Chu, senior VP of content, Disney+. That includes exclusive rights to all 30 seasons of ‘The Simpsons,’ which Disney obtained through the acquisition of 21st Century Fox. In year five of Disney+, the company expects to have an annual production slate of some 50 originals, Chu said.”
Netflix shouldn’t be concerned. HULU and the new Apple TV system should be very concerned. Disney’s portfolio can’t be matched, especially with the addition of the Fox portfolio. These OTT systems are often used by parents to occupy their kids on trips and errands around town, as well as at home. The Disney plan is perfect for that. And at 6.99 it is about the same cost that we used to pay to rent a VHS or DVD at Blockbuster. Parents will have no issue with that price. There has been a lot of talk about Disney keeping its portfolio exclusive for its own system. That reduces what is available to HULU dramatically, especially after NBC/Universal launches its system in 2020. If Disney and NBC/Universal don’t share these with HULU it is out of business, and that may be Disney’s long-term plan as there is no reason to have two streaming services. As for Apple TV it is hard to see where they are going to get the kind of portfolio they need, especially with AT&T owning Warner and planning to have a streaming service of its own. Because AT&T needs Apple users for its 5G system there may be some type of sharing there. But if Disney, Warner and Universal refuse to share, Apple TV is going to have a really difficult time getting people to pay into their streaming system unless they come up with a Game of Thrones. And we have seen over the past seven years that is easier to talk about than produce. There is going to be a shake out, but Netflix and Disney are definitely going to be among the survivors along with Amazon’s “sort of free” system.