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– by Joseph Jammer Medina

Without a doubt, a creating one’s streaming service is an expensive enterprise, but if there’s a studio that can make it happen, it’s Disney. In addition to having an ungodly number of resources, they have intellectual property that others can only dream of.

In addition to their Disney content, they have Pixar, Marvel, and Star Wars at their disposal. It should a given that there’s a lot of money being left on the table. Why license out all that content to various distributors when you can do it yourself?

That’s exactly what Disney decided to do. Not too long ago, they announced their plans to launch a streaming service in 2019 that will have all their branded content (Pixar, Marvel, and Star Wars included) as well as original films and TV shows, and as a result, they would be pulling it all from streaming services like Netflix. It sucks for Netflix and for audiences, but it makes sense from a financial standpoint for Disney.

Of course, this approach is not without its difficulties. According to UBS (via Business Insider), Disney makes around $2 billion a year on film and TV licensing, and of that, $500 million comes from Netflix. So right off the bat, that’s a quarter of their licensing revenue gone. In addition to that, there will also be a lot of other upfront costs needed to make this happen.

When all said and done, UBS calculated that the House of Mouse would need 32 million monthly subscribers (paying $9/month) to break even on their investments. That’s right. 32 million!

Let’s put this into perspective. Netflix — the most successful streaming service to date, and only earlier this year did they break the 100 million subscriber milestone.

Okay, so they need to do about a third as well. Considering it’s Disney, it still may seem feasible, but let’s have a look at some of the other subscription services:

  • Netflix: 128M subscribers (expected 2017)
  • Amazon: 85M subscribers (expected 2017)
  • Hulu: 32M subscribers (expected 2017)
  • HBO Now: 3.5M subscribers
  • CBS All Access & Showtime: ~ 4M subscribers (both owned by CBS Corporation)
  • Crunchyroll: 1M subscribers

So in order to be successful, Disney will need to be rubbing elbows with the likes of Hulu, which is a service that’s also a joint venture they’re a part of, along with Fox, NBCUniversal, and Time Warner. It’s a tall order, for sure, but it’s not unachievable, according to UBS.

“While [32 million subscribers] is not a stretch at all given our bullish expectations for the growth in the SVOD [streaming video] marketplace globally, it certainly creates greater EPS [earnings] uncertainty for the next several years during a period where investors are already nervous about secular trends for ESPN.”

It’s a sentiment that makes sense. While streaming services seem ubiquitous right now, there’s still plenty of room to grow. Add in the brand recognition of Disney, and you have some real potential. One other aspect we can’t overlook is the fact that Disney will almost assuredly charge more than $9/month for their service. Given their branding, we’d be surprised if it came in at less than $15/month, but we’ll see what the market is willing to do.

What do you think? Do you think Disney will have a hard time reaching 32 million subscribers? Let us know your thoughts down below!

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SOURCE: Business Insider, Forbes

  • At some point either there’s going to be a serious culling of these services or the big studios are going to realize that they’re stronger together. Imagine a Disney-WB-Fox-Sony alliance? Sounds crazy, but I wouldn’t rule it out when so many dollars and eyeballs are involved. No one thought Spider-Man in the Avengers would happen either, yet here we are.

    • Victor Roa

      all companies will always have their fingers in the cookie jars

    • Moby85

      The smaller ones will be culled or merged for sure.

  • Victor Roa

    Disney has been really ambitious with a lot of things but this is really something where it helps not to be such a share holder quarterly earning driven company. You need to have to freedom to fail and take risks, comparing themselves with netflix is ridiculous because Netflix is 20 years old. It’s better to compare with them with HBO Go because it’s fairly new but also had the huge scandal of being removed from cable companies deals.

    • I worked for Disney a few years ago (in their social gaming subsidiary), they are a super-battleship and would sooner run you over then change course. Disney spent $763 million to purchase Playdom in 2010, and their corporate culture hollowed-out Playdom within a couple years. I doubt that Disney cares whether this makes money or not, it’s an experiment to see what happens, and I’m sure they’re hoping that Hulu or one of the other major studios takes a major financial hit and becomes the next Disney acquisition.

      • Victor Roa

        Yeah, I remember playdom, but I’ve been fallowing Disney’s video game activities and it’s been as long as Sega Genesis Aladdin and it’s been this slow venture for them. And a part of me loves it because Disney has some INSANE TALENT and they add more value to the industries they get into then just third party license cart racers (which an old roomate works on) but then they chicken out after 3 years development cycles. I do think money is still an issue with them, and that’s why something like Disney Infinity gets shut down dramatically short right before…. and I kinda fear the same thing with the streaming service. Yeah, I can see them buying Hulu but Hulu kinda shot itself in the foot by no longer doing ads.

  • randomironicname

    Who the hell is paying to stream CBS?

  • Lenin1959

    I heard even every independent studio will now offer its own streaming service. A great idea! Where would e.g. pop music be now if not every label had its own record shop offering only its own titles back in the day? Right? Do you remember your video rental stores offering only Fox or Universal or… – This is what made movie rentals great!

    Guys, really, the suits are so incredibly stupid they would die in front of a closed fridge. They just don’t learn.

    • These are great points, I completely agree with you. However, I get what the studios are doing, they’re going full Darwin on streaming, but they’ve already lost the game to Netflix, Hulu, and Amazon (although, I suspect Disney or one of the other majors will buy Hulu).

      • syambo87

        they did buy Marvel Studios and Star Wars… they could Buy Hulu… hell… they could probably buy AT&T or an internet company and have people pay an internet service that includes their Disney Streaming Free… suddenly i got a chill at the back of my spine…

  • mahunterjr

    Disney’s service is going to crash and burn. Few responsible adults are going to pay a subscription simply for access to Disney content.

    Who consumes that much Disney content, that isn’t satisfied by just watching and/or DVRing the Disney channel.

    I bet they won’t even make as much as they’d been making from Netflix licensing fees.

  • Moby85

    Well, I won’t be one of those 32 million and I certainly won’t be at $15/month. Netflix is already getting sued in Canada over their latest price increase. And about the $10/month mark is where I might break. Do I want to be paying more than $10/month for what amounts to a single “channel” with a decent but inconsistent back-catalog? Probably not.

    Realistically, since Netflix allows it, I might just activate the service a few months each year to binge NARCOS, Love, and of course, Fuller House.

    • I’m following the same solution for HBO. I don’t want to pay $10 a month as part of my cable service (I don’t watch it nearly enough to justify the cost). So I’ll get HBO Go once or twice a year to binge-catch-up.

      I’m already paying $100/month for high-speed Internet access, $35/month YouTube TV (I’m a cord-cutter), $9.99/month for Netflix, $99/year for Amazon Prime, and my wife pays $8/month for Hulu. So I’m sure as hell not subscribing to CBS All-Access, Disney, etc. too, for just a few shows that interest me.

  • syambo87

    a. if they include the likes of Disney Junior and Disney XD shows ect… i’ll probably be cancelling my cable tv subscription cause only my kids watch TV and they watch Disney Channel Shows… Cartoon Network isn’t what it used to be… its more like Adult Swim 24/7…

    $10 bucks a month would be cheaper than my currently paying cable tv… im not from america… i’m paying roughly $45 bucks a month on cable TV to get AXN, HBO History and Sports… plus a few others… but its like paying for the option of having those channels… i dont watch them so much…

    b. Disney could actually do the craziest thing and give people 1 month free subscription to anyone that goes to Disneyland… or even… have the Annual Pass to Disneyland…

    they could make the 32 million subscribers with a snap of their fingers… Star Wars Lego shows… Star Wars Animated Series… Doc McStuffin… all the Marvel Animated Shows… thats alot of stuff under the Disney name… and its very big in Asia…

  • Juan Javier Coka

    if disney want to be successful the need to go the netflix and amazon way and not the HBO way. Netflix is the same everywhere you are no matter the country. only the movies that aren’t theirs change depending on the licensing agreement. i can watch the defenders the day it comes out in Ecuador, Argentina, USA, UK, etc. doesn’t matter. HBO uses different apps for different locations and if you live in one location and want to travel you won’t be able to tuse that same app. its stupid, if disney does what HBO did, they will fail.

Joseph Jammer Medina is an author, podcaster, and editor-in-chief of LRM. A graduate of Chapman University's Dodge College of Film and Television, Jammer's always had a craving for stories. From movies, television, and web content to books, anime, and manga, he's always been something of a story junkie.