8 Things We Just Learned About Disney’s Future
Every fiscal quarter (relax, it’s not a numbers column), Disney’s high-level executives participate in a conference call. They announce the details of the company’s financial performance, but they also leak the occasional detail about recent and upcoming events. The most recent call was particularly enlightening. Here are eight takeaways about Disney’s short-term future.
A Channel Uncle Walt Would Love
Disney CEO Robert Iger is a participant in all of Disney’s fiscal earnings conference calls. Since he’s dialed in on all of the company’s secrets, he’s the one who doles out the most tantalizing tidbits most of the time. To learn them, you have to sift through 13 pages of boring conference call transcripts, though, and NOBODY wants to do that.
Fortunately for you, that’s my job! I’ll save you the aggravation while giving you the important information. And the first thing that caught my attention is something that Iger mentioned almost casually. When Disney’s acquisition of Fox gets finalized, they’ll own National Geographic Partners, which in turn means that they’ll own the National Geographic Channel.
What’s the big deal about this? Walt Disney was passionate about conservation and nature. His True-Life Adventures were an integral part of his entertainment offerings, and the studio won three Academy Awards for Best Documentary for these titles. National Geographic’s origins date back to the 19th century and were a huge influence on Disney. He would adore the idea that his company owns the entirety of National Geographic’s offerings. Iger seems extraordinarily proud of what this deal means in terms of augmenting Disney’s roots and core beliefs.
Disney Will Do Better at the Academy Awards
Speaking of the Academy Awards, I’ve previously chronicled the way that Disney generally gets shut out of the major awards. Instead, they usually “settle” for one or both of Best Animated Feature and Best Animated Short. The Fox acquisition should change that.
One of Fox’s prime pieces is Fox Searchlight, their prestige cinema division. This one group earned 20 nominations in 2018 alone! That’s more than twice as many as Disney managed. Fox Searchlight’s The Shape of Water is the reigning champion in the Best Picture category, too. With this division under the Disney umbrella, the company will be a much larger factor starting with the 2020 Academy Awards. Iger sounds quite excited about this proposition, too.
DisneyFlix Will Have Lots of Original Content
Do you watch Netflix regularly? Have you noticed that you’ll receive a recommendation for a new Netflix series/movie almost every Friday? That’s not accidental. Netflix has a timed release schedule for original programming.
Disney’s upcoming streaming service, dubbed DisneyFlix by analysts, will have a great deal of original programming, too. Iger notes that a combination live-action/animated remake of Lady and the Tramp is getting made now. Similarly, the studio’s developing television series based on successful Disney intellectual properties such as High School Musical and Pixar’s Monsters, Inc.
Iger confirmed that Disney’s working on at least nine movie exclusives for their new streaming service. He expects that some of them will be debut when the service launches toward the end of 2019. He also indicated that the production budgets for these projects range from $20 to $60 million. One of the other remakes is The Sword in the Stone, which makes this particular fanboy very, very happy.
The Star Wars Series Is Kind of a Big Deal
Iger gushed about the DisneyFlix-exclusive Star Wars series. Reports indicate that a ten-episode season will cost the corporation roughly $100 million. It’s a massive investment, but Iger’s comments indicate that he believes the first ever live-action Star Wars series will drive sales for the streaming service. He’s absolutely right about this.
Despite the recent struggles of Solo: A Star Wars Story, franchise fans are undeniably loyal. Disney’s doubled down on their belief in their core audience. They’re producing another season of Star Wars: The Clone Wars, too.
Clearly, the popularity of Star Wars will go a long way in determining the early fate of Disney’s streaming service. The timing of this rollout is fantastic, though. The company will promote the subscription offering around the same time that they’re marketing the final installment in the current Star Wars movie trilogy.
Anticipating the Netflix Loss
Disney casually mentioned a key component of their current entertainment earnings. They receive a licensing fee from Netflix in exchange for the rights to certain Marvel characters. On the conference call, an executive mentioned that Disney gained more for Luke Cage this year than for The Defenders last year, a quirk of successful sequel pricing.
This minor tidbit reflects something important about Disney’s decision to cut ties with Netflix. Virtually all of the money that Disney makes from their perceived competitor is pure profit. Netflix pays for the rights while Disney has to do little in exchange. The Mouse House loses that money for all Netflix products whose rights they’re revoking.
I should note that the current Marvel characters like Jessica Jones and Luke Cage aren’t leaving Netflix anytime soon if ever. All of the movies and television series that Disney currently licenses will stop being revenue-generators, though. Disney needs to recoup that lost revenue by generating an accompanying amount of streaming service sales. That’s an aspect to watch moving forward. Disney’s putting a lot of eggs into their streaming basket. If it fails, they could have financial problems that have ripple effects elsewhere within the company.
Projecting the Fox/Marvel Gain
Iger said something that caused me to do a double-take. He explicitly mentioned Marvel’s X-Men and The Fantastic Four as licenses that could boost the current Marvel Cinematic Universe (MCU). I’m not sure whether this means anything to you or not, so please let me explain why this is a big deal.
When Disney purchased Marvel, it couldn’t negate the standing product licenses with other companies. A notable one was Fox’s licensing of these beloved superhero groups, the X-Men and Fantastic Four. Disney couldn’t introduce any of those characters into their movies.
This seems like a good time to mention that the MCU is heading toward a crossroads. The next Avengers movie will wrap up a decade of storytelling. More importantly, it will give several popular actors a chance to finish their contracts and head off to new gigs.
Disney will feel that vacuum as their newer, cheaper talent attempts to replace beloved people like Scarlett Johansson, Chris Hemsworth, Chris Evans, and (especially) Robert Downey, Jr. By bringing in characters that haven’t previously existed in the MCU, however, they have an opportunity to make sweeping changes in subtle fashion.
If Disney did a Captain America movie without Chris Evans, that would be the story…unless it were an Avengers vs. X-Men movie. That’s a recent comic book storyline that would pay immediate box office dividends.
Similarly, the most recent Fantastic Four movie bombed spectacularly. If Disney’s MCU team were in charge of the next film, however, people would forget that failing. You may dispute this, but I can prove it quite easily.
You’ve probably already forgotten about Andrew Garfield’s tenure as The Amazing Spider-Man in two (!) different movies. You did so because they were forgettable. Despite their general suckiness, everyone gave Spider-Man: Homecoming a chance since it was an MCU project.
Disney’s ownership of Fantastic Four and X-Men provides both franchises a clean slate. From Disney’s perspective, it also gives the people running the MCU more creativity and depth in choosing their upcoming film slate. They can earn a LOT of money via these regained Fox assets.
Disney Plans a Three-Pronged Streaming Attack
During the conference call, Iger suggested that his research indicates a large percentage of people subscribe to multiple streaming services. He stressed this fact and clearly finds it important. He should since he went on to describe Disney’s layered approach to Over-The-Top (OTT) streaming.
Currently, Disney owns and operates ESPN+. While Iger refused to provide numbers for the early days of the service, he explicitly stated that it’s exceeded expectations thus far. It’s a questionable statement since Disney’s expectations are an unknown. It does lead to a more significant comment, though.
Iger pointed out that his company will have a controlling interest in Hulu at this time next year, barring something unforeseen. While some skeptics had wondered whether Disney might shutter this service due to its perennial financial losses, Iger stated that Disney will support it. He then added that Disney’s streaming service will never join with the other two OTT channels that his company operates.
In other (extremely important) words, Disney will run three different streaming services for the foreseeable future. Hulu is the cable replacement that features first-run programming of popular shows from multiple major networks. It has a skinny bundle channel lineup option, too. In a sense, Disney views Hulu as the true replacement for cable.
The company will run ESPN+ as the future of sports broadcasting. They’ve watched popular third-party apps like Fite TV do surprisingly well in selling live events for a set fee. Disney plans to collate the largest collection of live sports events ever, making them available via a single subscription fee. Analysts understandably wonder about the finances of this plan since live broadcasts are brutally expensive on their own. And the broadcast rights are oftentimes savage.
ESPN is in a hole right now specifically because of its licensing agreements, particularly the NBA. They paid more for their content last year than Netflix did! Now, Disney’s added massive deals for Top Rank Boxing and UFC live events. It’s a daring gambit, and there’s a strong logic behind it. Live television advertising rates are the most lucrative, and Disney’s expected to use these ads at some point, just not yet.
Still, ESPN+ and Hulu seem like risky propositions right now. The Disney streaming service needs to provide an anchor for the company’s OTT future. That’s why Iger plans to invest so much in new movies and television series. He understands that he must entice younger viewers to become early adopters. Otherwise, Disney’s current financial strength could collapse.
As strange as the statement sounds, the overall health of Disney’s OTT streaming services will determine how much the company can afford to spend at your favorite theme park. We need these risks to pay off so that Disney has the capital to invest in bigger and better park experiences.
PS: Iger might have accidentally (or intentionally?) tipped off the people on the conference call about the name of the streaming service. He explicitly called it “Disney Play” during the call. It’s a nice, clean name that would dovetail nicely with the recent introduction of the Play Disney app. That’s why I’m not inclined to believe it’s coincidental…
Disney’s future is as bright as it’s ever been. We can’t wait for what’s next on the horizon!