Disney’s Grand Plan for Making Money on Disney+
There’s a hot Disney rumor that may (or may not) get confirmed during Disney’s upcoming Investor Day today.
As a Disney fan, you really need to know it, as this potential change will impact the way you watch Disney+.
CEO Bob Chapek may have plotted a new grand plan for Disney+. Let’s discuss what it is, why Disney would do it, and what it means for you.
What’s the Rumor?
MickeyBlog doesn’t often traffic in rumors, but when the Washington Post is talking about one, we should, too.
According to a leaked promotional video, Disney+ will add a new section in 2021. And it’ll be called Disney 18+. Here’s the clip:
When I say its name, I may be getting ahead of myself, as that’s not confirmed yet. However, the impacted content fits that description.
When Disney acquired Fox last year, lots of movies and television series came in the deal.
Many of them don’t fit the current Disney+ business model.
Perhaps the best example involves the Deadpool franchise, something I wouldn’t show my mother, much less a small child. I love the movies, but…
Another recent and relevant example is The Shape of Water, which won an Academy Award for Best Picture.
Alas, the film also shows the protagonist having sex with a humanoid amphibian fish dude. That’s not appropriate content for Disney+…as is.
Disney spent more than $70 billion on its Fox assets, though. The company wants to mine them for everything they’re worth, but it cannot do so on Disney+.
Well, that’s the philosophy, and it explains why so many streaming media analysts (including me) have predicted that Hulu would expand.
This strategy comes with its own set of problems that we’ll discuss in a bit.
Overall, adding a new section to Disney+ makes more sense. It comes with a side benefit, too.
The Other, Sexier Part of the Rumor
Much was made of Disney’s decision to release Mulan as a special title on Disney+.
That feature became the first Premier Access title, allowing users to buy unlimited rights for $29.99.
Mulan presumably hasn’t done well – we’ll find out for sure on December 10th – at least according to analysts.
Still, Disney created an entirely new name for the service. As a friend said on a podcast, you don’t name something you only plan to use once.
Disney has intentions for Premier Access to become a thing, a kind of bridge between theatrical releases and streaming service debuts.
With Premier Access, Disney could take a title like Black Widow and enable guests to purchase it at home.
The presumption here is that the target audience consists of potential consumers who are unwilling or unable to go to a movie theater.
During the pandemic, there’s little difference between the two, but a vaccine is just around the corner.
Disney may have decided not to wait, and they no longer must do so thanks to a competitor.
Warner Bros. just announced that Wonder Woman 1984 will debut simultaneously in theaters and on HBO Max.
A day-and-date release for a $200 million production qualifies as more than unprecedented. It’s also precedent-setting.
Now that WB has taken this approach, Disney can follow suit without receiving the negative headlines it garnered in the wake of Mulan.
Remember this dude?
— Destination Ciné (@destinationcine) August 6, 2020
Yeah, Disney neither wants nor needs those sorts of news cycles. So, that’s why we haven’t heard anything about Black Widow…until now.
The leaked footage indicates Black Widow will debut on Disney+ on April 16th, 2021, as a Premier Access title.
Presumably, starting on this date, you can buy Black Widow to watch repeatedly at home for $29.99.
What’s Disney Doing?
There’s so much to unpack here, but I’ll try to be brief.
An essential element of this strategy circles back to the shaky status of movie theaters.
Disney had planned to release Black Widow last May, but then the pandemic hit. Plan B punted the theatrical debut back to November.
Well, November’s over, and we still don’t have Black Widow. It’s since dropped back to next May (Plan C).
Even that date remains in question, though.
In Final Fantasy terms, the movie industry’s health falls somewhere between needing an elixir and a tuft of phoenix down.
In non-nerd terms, that means the industry’s in the process of dying vs. legitimately dead.
By May, a staggering number of movie theaters may have closed.
Even now, New York City and California locations remain closed, having never reopened. Disney cannot count on theatrical releases at the moment.
Ergo, Premier Access becomes Plan D, the method through which Disney can ignore movie theaters entirely. And it makes sense.
Disney+ has already exceeded even the most optimistic of expectations. Nothing will spike subscriptions the way that Black Widow would, though.
This video also shows The Falcon and the Winter Soldier with an August 13th debut.
Presumably, that title must arrive after Black Widow for storyline purposes.
So, Disney may be rebooting the Marvel Cinematic Universe with a total focus on Disney+.
That content would sell people on Premier Access. A single film purchase of $29.99 would be cheaper for families than a trip to the theater.
Currently, MCU content already sells Disney+, but film exclusives would do even better.
The Money Part
Disney’s other current problem stems from its streaming service’s early success.
Executives expected Disney+ to grow gradually. Nobody anticipated tens of millions of subscribers to sign up during the first six months.
The pandemic also factored heavily into the immediate popularity of the service, with many customers trapped at home in 2020.
Unfortunately for Disney, it offered many discounts, including a three-year deal for D-23 members.
The overwhelming majority of Disney+ subscribers have locked in rates through 2022.
At the start of 2020, this seemed like a good thing, but it’s now problematic.
On the average subscription, Disney+ earns $5.30 in revenue in the United States. It’s a business metric known as ARPU (average revenue per unit).
In this case, a unit means a subscriber. For comparison, Netflix was recently quoted as $13.40 per subscriber.
In other words, Netflix nets $8.10 more per customer. Disney executives must solve for X here and find a way to close that revenue gap.
The difference could define Disney for a generation, and that’s not hyperbole.
At its current revenue per customer rate, Disney+ would earn $4.7 billion annually. With Netflix’s ARPU, Disney+ would jump to $11.9 billion.
Folks, that’s enough of a difference to fund an entirely new theme park…and Disney would earn that each year!
Now, that’s an impossible jump at the moment, but the $8 billion range seems viable. You can imagine what that would do to Disney’s bottom line.
How does the company reach that plateau? You guessed it! Disney raises rates!
That’s something the company can’t do with the standard service due to contracts. However, a Disney 18+ service would justify a higher price.
The Other Reason
Hulu isn’t a viable fit for this 18+ content because that service harbors a dirty industry secret.
Internationally, Hulu lacks any presence or content library. In fact, Disney would have to pay for virtually all licensed content overseas.
The current Hulu contracts focus on North America almost exclusively. Overseas, Disney lacks the arrangements needed to provide quality content.
So, Disney needs a business model that enables it to serve Fox/more adult content without alienating Disney+ customers. And that’s not Hulu.
In fact, if this rumor proves untrue, it’s likely because the leaked video comes from an international ad because of Hulu’s weaknesses abroad.
However, that’s another solution that Disney 18+ would solve.
With this option, you can keep your standard, extremely low-priced current version of Disney+. Or you can buy the Disney 18+ upgrade for more.
Just like that, Disney improves revenue per customer without forcing anybody to pay more!
This strategy maximizes Disney’s Fox acquisition, too.
For you, it means that you’ll soon have more options with your Disney+ subscription.
More importantly, you may get to watch Black Widow in the comfort of your own home in April!
We’ll know for sure on December 10th, but this idea makes too much sense not to be true.