Disney Will Need Over 30 Million Subscribers For Their Streaming Service To Break Even

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

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Joseph Jammer Medina

Joseph Jammer Medina is an author, podcaster, and contributor at LRM Online. 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.

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