Disney revealed crucial details this week around its plans for Fox’s entertainment assets and how they fit into the business’s wider SVOD plans. We now know that the turbo-charged service set to give Netflix a run for its money is Disney+, which will launch with brands including Nat Geo, Pixar, Marvel, Star Wars and Disney content. What else can we expect from the Mouse? Read on for our top takeaways from Disney’s Q4 report.
Disney CEO Bob Iger has made it abundantly clear that the business is increasing investment in the Handmaid’s Tale streamer, most notably across programming, which will be more adult-oriented than Disney+. “We aim to use the television production capabilities of the combined company to fuel Hulu with a lot more original programming, which will enable Hulu to compete even more aggressively in the marketplace,” he said in an earnings call. This could bode well for Peaky Blinders producer Endemol Shine Group, which will fall under Disney’s part-ownership next year when the acquisition closes now that the sale has been suspended.
Pointing to Hulu’s youth-skewing audience, Iger said: “If you look at the demographics of people consuming off-network shows on Hulu, and you look at the demographics of the same shows on the network, you’ll see what could be, at times, a 20-years younger audience at Hulu.” The exec wants to make Hulu a stronger advertising play “because it can offer targeted ads”.
Iger wants to grow Hulu’s subs and notes there is “some pricing elasticity”, particularly on the multi-channel front. “There’s an opportunity to improve – or I should say increase – our pricing there.” Hulu will also be launched outside of the US – a strategy that is sure to affect its prized position as the ultimate US co-production partner for scripted programming. Disney must first wait for the Fox deal to close and will then meet with the Hulu team and board to discuss global growth and content investment.
The service may not be “quite ready for prime time” just yet, but the finished product promises to be “elegant and very brand-centric,” said Iger, noting that Disney+ will have the navigational features that “typically don’t exist in other platforms.” There will be segments under each of the five key brands. “We’re going to super-serve the most ardent fans of those five brands by creating experiences and environments that are more tailored or customized to those brands.”
Iger remained largely mum on the issue of Disney’s third-party deals and existing agreements. “There’s been some reporting about this, that we’re in the market seeking to amend the terms of some of those agreements. I think it would be best if I simply confirm that we are in some discussion about this, but I’m going to leave it at that.”
“There’s nothing we can do about it,” said Iger, noting that the business made an “appropriate bid” for the European pay-TV business. “We would have loved to have Sky, both because we believe in the asset and we thought it could have helped us in terms of introducing a direct-to-consumer service in the European market, but again, only at a price that made sense for us.” Iger added that Disney+’s expansion in Europe is not contingent on Sky, and will go ahead. However, he cautioned that it could take “a little bit longer to penetrate” some markets.
The SVOD will be tailored for “various European markets” regardless of new SVOD quota regulations. “It needs to be locally relevant,” said Iger. “We’re going to be selective in the markets we choose initially, but we believe we’re going to win.”
Launched in April, the US OTT service has more than 1m subs. Live events include Top Rank Boxing, Major League Baseball, NHL, MLS and Italy’s Serie A soccers, as well as college sports events – a major growth area for the platform. UFC will be added to the ESPN+ line-up in January. “The early growth trajectory of ESPN+ is very encouraging and bodes well for our overall global DTC strategy,” said Iger. However, the growth of the service will shave around $100m from operating income in Q1 2019.
Iger bragged that ESPN+ has been a success without a great deal of marketing. As the service expands with more “technology features”, Disney will begin putting more marketing dollars behind the platform to accelerate its growth, particularly across college sports. “We’re just beginning a process to start marketing very specifically to alumni from different colleges, who may not be able to find sports from their college on what I’ll call the national sports networks. We’re going to serve them well on this platform.”
Disney’s earnings per share for the quarter were $1.48, up 38% for the quarter and 24% for the year. Growth was driven by Studio Entertainment and Disney’s parks and resorts division. Higher Studio results were largely due to growth in Disney’s worldwide theatrical business, and TV/SVOD distribution and home entertainment. In 2019, results will be reported across four distinct segments: Media Networks, Park Experiences and Consumer Products, Studio Entertainment and Direct-to-Consumer and International.
Iger promised “unprecedented access” to Disney’s library of film and TV content. However, the theatrical release window will be protected, meaning you won’t see day-and-date releases quite yet. However, Iger noted that there will a discussion around “moving the product from the [theatrical] window to the pay-window a little bit sooner”.