Disney’s plan to take on Netflix is no Mickey Mouse move
Investors welcome the Hollywood powerhouse's entry into the streaming market, as chairperson Bob Iger signals his exit
Disney shares surged to an all-time high last week after it revealed aggressive plans to tackle the rise of Netflix with its own streaming service.
The Hollywood powerhouse is preparing to launch Disney+, an internet video subscription carrying the full gamut of films and television from Disney, Marvel, Star Wars, Pixar and National Geographic. Chairperson Bob Iger told investors it will debut in the US in November at $6.99 (R98) per month, substantially cheaper than Netflix at $12.99 for its standard subscription.
Disney shares surged as much as 12% on Friday, hitting a record high of $130.90 and valuing Hollywood’s biggest studio at more than $230bn. Netflix sank up to 5%, although it remained up more than a third this year.
Iger has been gradually taking back control of distribution in preparation for his global push into streaming and so-called direct-to-consumer operations. Though it is one of the world’s most recognisable brands, Disney has to date been an overwhelmingly wholesale business, dealing with pay-TV and cinema operators. To execute the radical change in strategy, Iger aims to ensure that Disney+ has exclusive rights to the studio’s back catalogue as well as new productions, to create more incentives for consumers to sign up.
Disney has also stopped providing programming to Netflix, which initially built its subscriber base on material sourced relatively cheaply from traditional studios and broadcasters who did not then see it as a major threat. Netflix is now investing billions annually in its own productions as the television industry reacts to its success, and its range of suppliers is depleted.
The UK’s BBC and ITV are also reducing sales of rights to the streaming pioneer as they prepare to introduce their own subscription streaming service, BritBox, later this year. Disney said it expects to attract up to 90 million subscribers for its streaming service by 2024. Netflix is already closing in on 150 million.
Iger made his latest big move less than a month after Disney completed its $71bn acquisition of most of Rupert Murdoch’s rival studio 21st Century Fox. The deal was presented as part of preparations for Disney+. Iger also gained control of Hulu in the takeover, a US streaming joint-venture that carries more adult-oriented programming such as the Fox animation Family Guy. Disney now plans to roll out Hulu around the world, too.
Big screen to big stream
Iger is racing to adapt Disney to streaming as viewing shifts rapidly. The traditional bundle of US cable channels previously delivered healthy profits to studios but is now under threat as households switch to a pick-and-mix of cheaper online options.
Hollywood is also in competition with Silicon Valley to profit from the change. As well as Netflix, Amazon and Apple are building subscription streaming businesses, pouring money into their own programming as well as licensing archives.
Iger, who also sits on the board of Apple, confirmed during the Disney presentation that he plans to retire when his contract as chief executive ends in 2021. A search by the board is already under way for his replacement. He said he had no plans to step down from his role at Apple.
– © Telegraph Media Group Limited (2019)