Can Disney+ Day Distract From A Crummy Quarter?
(image courtesy of Disney)
Disney investors were deeply unhappy after this week’s quarterly earnings, with only 2.1 million new Disney Plus subscribers after analysts had projected adds of more than 10 million. Shares fell off a cliff Thursday, dropping about 8 percent, though some investors took that as an opportunity to stock up at $160 a share rather than the somewhat overheated level of $177 some days earlier.
Disney execs still project the Plus will have 230 million to 260 million subscribers by 2024, but analysts are less sold on those numbers these days. With 118.1 million subscribers, Disney Plus is still about 100 million behind Netflix. The company’s other streaming operations add another 61 million subscribers, not insignificant but loaded with caveats, given the uncertainties in several corners of Disney video strategy.
With all this going on, perhaps it’s not surprising that Disney announced a week-long “global celebration” called Disney+ Day “to thank fans for their support over the past two years.” It doesn’t quite land on the Nov. 11 anniversary of the original D+ launch (China’s Singles Day, that country’s Black Friday, happens on Double 11s).
Disney+ Day Distractions
Disney+ Day offerings include:
On Friday, the actual Disney+ Day, Shang-Chi and the Legend of the Ten Rings will hit the service, along with Jungle Cruise, previously available there on Premium VOD, and Enchanted, a 2007 animated film that somehow wasn’t part of Disney Plus before now.
Most other new releases are much less enthralling, mostly an exercise in stuffing lists with bullet points, in this case, behind-the-scenes documentaries, making-of videos, and shorts featuring prominent franchise characters. For those awaiting his return, there’s also the second season of quasi-talk show The World According To Jeff Goldblum.
Somewhat more interesting is the launch of “IMAX Enhanced” versions of Shang-Chi and a dozen other features. The format is relatively new, using the more-square aspect ratio of the giant screen exhibitor, filling up more of that fancy 4K TV screen you bought with your stimulus check. It means 26 percent less letterboxing, along with DTS audio, and a more immersive experience. Sony’s best TVs, with the Bravia Core interface, give buyers access to some Sony Pictures films, like the past couple of Spider-Man movies, in IMAX Enhanced format as a nifty bonus. Realistically, it takes a screen like the Sony A90J and A80J screens to really take advantage, but regardless, nice to see some higher-end experiences available on Disney Plus too.
Subscribers also will get, over the long weekend, access to lots of little short-term gimmes and deals. For theme-park attendees, that means bargain prices, early admissions, photo opps, “character moments,” and more; purchases through the company store will get free shipping.
If you just can’t get enough behind-the-scenes stuff, they’re selling cheap e-books about some Disney Plus shows. Subscribers will get discounts on Funko collectible figures, and access to newly launched NFT digital collectibles.
Somewhat counterintuitively, the company will sponsor “surprise screenings” of some of its classic films at 200 AMC Theaters. Personally, this makes little sense, given the whole point of subscribing to Disney Plus is the opportunity to see a bunch of old movies at home without having to sit in a dark room with perfect strangers during a pandemic. But that’s just me.
And finally, newcomers/returnees will briefly have access to one-month discount on the service’s $7.99-a-month subscription fee, to a really meaningful $1.99 a month. The price break is available through Sunday, so grab it quick, even if it “feels like a bit of a gimmick,” said CNBC commentator Pete Najarian, co-founder of MarketRebellion.com. It’s worth noting that despite Najarian’s assessment, he also used the plunging price on the company to pick up some discounted shares.
Will the celebration bring much of a bump in subscriber adds? Of course not. But maybe if the company knitted together these kinds of deals and discounts into the broader subscription package, they might be able to get the add train back on track. Park perks, shipping and shopping discounts and similar add-ons are just the sorts of things that might provide deep value for true Disney fanatics, the core audience of the service.
Should Disney Make More Shows?
Turns out, making more shows for Disney Plus might help too. Analyst Craig Moffett of MoffettNathanson suggested the company should spend way more than the $8 billion to $9 billion now devoted to streaming content. For comparison,Netflix spends around $17 billion on content.
It’s true that Disney is spending plenty of money on content elsewhere. There’s the billions it has committed in recent months to a series of eye-popping deals for sports rights, for instance, to flesh out ESPN/ESPN+.
The company is also still spending a surprising amount on its legacy operations on ABC, FX, and elsewhere, including heavy-hitter franchises such as Grey’s Anatomy, The Bachelor/Bachelorette, Dancing with the Stars, and The Good Doctor. None of those shows is available on Disney Plus after its linear run, by the way.
Some analysts suggest the company should consider moving beyond the sharply delineated programming lines Disney uses for Disney Plus versus Hulu and ESPN+.
“If (preschool programming monarch) Cocomelon can flourish next to (horror hit) Squid Game on Netflix, Disney’s siloing of content on Disney+ is a mistake, not to mention its continued focus on balancing content between its streaming assets and legacy media distribution outlets,” analysts at LightShed Partners wrote this week.
Could Disney move to clarify its streaming commitments, perhaps by spinning out legacy operations ABC and ESPN, as some have suggested. LightShed reported “rumbles” of an even more sweeping restructuring, spinning off not just ABC and ESPN, but also FX and Hulu, where all the FX shows go. Disney must do something sooner than later; Comcast has a provision that will allow it to force Disney to buy out its 30-percent stake by 2024, at a minimum price of $9 billion. LightShed suggested that Hulu is only getting more and more valuable, and a buyout now might top $15 billion.
Disney isn’t the only major media facing complicated love ‘em or leave ‘em legacy issues, though not everyone has the same complicated three-headed beast and overheated expectations to manage.
Other Media Companies Still Growing
Among the other media companies reporting earnings this week, ViacomCBS said it now has 47 million streaming customers, up from 30 million at the start of the year. Streaming ad revenue up 48 percent, and streaming subscription revenue up 79 percent over the same period in 2020.
Discovery, one-sixth the size of Disney+, added almost exactly the same number of streaming subscribers to grow to 20 million. The 2 million bump came in just three months. Of course, whether Discovery+ will be more than a tab on the HBO Max interface by this time next year is another question completely. But for now, it’s doing about as well as Disney Plus this last quarter.
Disney has a lot of questions it needs to answer, regardless of a made-up anniversary and some momentary discounts and debuts. But investors still have reasons to feel okay, especially if they held off until now before buying the company. Here’s a lovely thought: Disney’s parks and resorts are on the way back, after providing a sturdy 40 percent of company revenues for years, and can go back to being a bedrock of the company’s revenue model.
Add that to a continuing, but slower Disney Plus growth, eventual resolution of all the other content-strategy issues, the addition of some sort of Disney-fied Metaverse play alongside those NFT collectibles, and maybe, just maybe investors will have reason to be excited again.