Utmaningarna hopar sig för Disney+ efter succélansering

Till och med rivaler som Netflix är imponerade av intåget på marknaden för utmanaren Disney+. Verizons vd Hans Vestberg hade ett finger med i tjänstens rivstart genom att ge sina bredbands- och mobilkunder gratis tillgång till Disney+ i ett år.

Men snart löper gratisåret ut för Verizon-kunderna och en stor del planerar att hoppa av tjänsten, visar enkätsvar. Samtidigt ökar konkurrensen om tittarna och den viktiga produktionen av eget innehåll har tvingats pausa under pandemin, skriver Bloomberg Businessweek.

Disney+ Faces Test as Free Trial for Verizon Customers Ends

After a great first year, the streaming service needs to convert viewers to paying subscribers, as Covid-19 clobbers Disney’s other businesses.

Christopher Palmeri with Scott Moritz and Lucas Shaw, 22 October 2020

When then-Walt Disney Co. executive Kevin Mayer sat down with Hans Vestberg, the soon-to-be chief executive officer of Verizon Communications Inc., at the 2018 Sun Valley conference in the Idaho mountains, it was supposed to be a get-to-know-you chat. The annual conclave of media and tech heavy hitters is known as a place where deals are hatched – and this meeting didn’t disappoint.

Mayer was plotting the launch of Disney+, the company’s big effort to compete with Netflix Inc. in the business of online video. Their talk set the stage for Verizon, the largest U.S. wireless carrier, to provide the service free of charge for one year to many of its mobile phone and internet customers. The offer gave the streaming service a boost when it premiered in November 2019, with Disney reporting more than 26 million subscriptions in the first two months, 20% of them from Verizon.

The pair-up was one of many decisions Disney made that have helped lure more than 60 million customers to its streaming service. The company hit the low end of its five-year subscription forecast in just nine months and is expected to post an even bigger subscriber number when it announces quarterly results on Nov. 12. Even rivals are impressed. “If you’d asked us a year ago, ‘What are the odds that they’re going to get to 60 million in the first year?’ I’d be like, ‘Zero,’ ” says Netflix CEO Reed Hastings. “I mean, how can that happen? It’s been a super-impressive execution for them.”

With consumers reluctant to go to movie theaters or theme parks, Disney’s streaming operation has provided an outlet for the company to release new movies and keep families entertained at home. On Oct. 30 it begins the second season of The Mandalorian, the Star Wars TV show spinoff that proved to be the service’s biggest hit at launch.

On Oct. 12, Disney announced it was reorganizing its TV, movie, and direct-to-consumer divisions, providing content in particular for the company’s growing lineup of streaming services, which includes ESPN+ and Hulu. Consumer behavior is driving the decision-making, says Disney CEO Bob Chapek. “We’re going to go ahead and take their cues,” he says. “And right now they’re telling us that they really want to see more and more content on Disney+ and Hulu.”

Among the most critical decisions was to put almost all of the company’s most popular movies and TV shows on the service, from Walt Disney’s original animated hits all the way to new films such as last year’s Avengers: Endgame. The move meant scrambling to renegotiate contracts that had some films, including the Marvel and Star Wars franchises, airing on other outlets.

Price was also a key consideration—just $7 a month or $70 for a full year. For a company known for obsessive customer research and premium pricing, the decision to undercut even Netflix’s entry-level $9-a-month fee was made quickly by Mayer—who left Disney earlier this year after being passed over as CEO—and then-CEO Bob Iger. The idea was to come up with an offer so low, customers would have a hard time refusing it. But price hikes could be coming. At an investor event last month, Chief Financial Officer Christine McCarthy said that “we priced Disney+ at a very accessible price point initially.” Another early call was agreeing to buy control of BAMTech, the video streaming arm of Major League Baseball, in transactions that totaled $2.6 billion and began in 2016. The business served customers such as the National Hockey League and HBO. Disney executives argued that having the technology in-house would give them a leg up in the streaming wars, pushing back against colleagues who said the benefits didn’t justify the cost, according to people familiar with the private discussions.

As Disney+ nears its first anniversary, new challenges loom. The Verizon offer begins to expire for many customers on Nov. 12. In a recent survey conducted on behalf of research firm MoffettNathanson, 44% of Disney+ Verizon customers said they would renew, while 37% were undecided. Verizon is trying to lure customers into top-tier plans with a bundle that also adds Hulu and ESPN+.

The streaming field is only getting more crowded. After a huge start to the year, Disney+ fell to fifth place in new subscriber sign-ups in the third quarter, from the top spot in the first quarter, according to Kantar, a consulting company. Peacock, the free service unveiled in July and being promoted heavily by rival Comcast Corp., was No. 1.

New content is also an issue. The number of Disney+ original episodes released in the third quarter, at 43, fell well below those of Netflix and Amazon.com Inc., according to MoffettNathanson research. (Disney says the number of episodes is higher.) The share of customers using the service daily dropped for the second quarter in a row.

Like everyone else in Hollywood, Disney had to halt production because of the pandemic and is only beginning to ramp up. Filming of The Mandalorian’s second season wrapped just days before the shutdown. WandaVision, the first in a series of Marvel-themed shows, is set to premiere in December, as will Soul, a new Pixar film that was supposed to be released in theaters.

“We will have something new virtually every week on our platforms, across all of our platforms, all of our franchises,” says Chapek, who took over for Iger in February, just as the virus was starting to spread around the globe. Although he came most recently from the theme park side of the business, the CEO is clearly glad Disney+ was there for him in this challenging year. “We’re not letting anything that’s happening in the short to medium term get us off track,” he says. “We’re going faster, bigger, stronger, along the same route that was set up six months ago, a year ago, year and a half ago. This is the direction of the Walt Disney Company.”

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