Thanks to its deep history and strong brand, Disney has garnered a reputation for being one of the world’s leaders in the entertainment industry. Founded in 1923, Disney’s success started with its animation studio through its creation of memorable characters such as Mickey Mouse, Goofy, and Donald Duck. Since then, Disney has expanded into the broadcasting industry, established some of the world’s most well-known amusement parks, and has added to its long list of characters. With markets moving towards on-demand video, specifically streaming video on-demand (SVOD) services, Disney’s next steps involved the release of Disney+. Announced on April 11, 2019, Disney+ is Disney’s newest venture in the SVOD industry. The streaming service gives on-demand access to Disney’s exclusive content library spanning its key brands including Marvel, Star Wars, National Geographic, Disney Channel, and Pixar. At 7 USD a month, how does Disney+ stack up against its competition?
Disney’s expansion to SVOD
How did Disney set themselves up for Disney+? The company was never originally known for its digital content but it has made strategic acquisitions in the past decade to set itself up for success in this growing market. Disney’s first step was to expand its film library with acquisitions of Pixar, Lucas Films, and 21st Century Fox in 2006, 2012, and 2019 respectively.
All three of these acquisitions have been tremendously successful and key to establishing Disney’s foothold in the digital film market. Disney then entered the SVOD market through the acquisition of Bamtech and the purchase of Hulu. Bamtech, originally the streaming service for Major League Baseball, acted as a platform for Disney’s release of ESPN+, and provides the digital infrastructure for Disney+.
Furthermore, Hulu, an independent streaming service, gave Disney valuable expertise and experience in the SVOD market. Together, all of these strategic acquisitions have contributed to the formation and launch of Disney+.
Drivers for success
Comprehensive Family Platform
Disney+ differentiates itself from the competition by providing a family-oriented platform that consumers can buy in addition to their current on-demand service. With growing digital viewership, Generation Z represents a tremendous opportunity for Disney+ subscribership. In 2017, Netflix found a 61% increase in kids and family streaming numbers worldwide.1 By segmenting themselves as a platform for younger viewers, Disney+ can take advantage of this rising trend.
Furthermore, the content featured on Disney+ appeals to individual family members: youth, teens, and adults. For example, Disney Channel, Disney Junior, and Pixar films primarily target viewers aged 2-16. On the other hand, Marvel’s largest demographic are those between the ages of 16 – 20. Finally, Star Wars appeals to a wide variety of age groups. While most of these brands are specifically targeted towards younger demographics, brands like Star Wars and Marvel also have a strong following among adults, including parents. By providing content aligning with multiple age groups, Disney+ further cements its position as a comprehensive family platform. When looking at the younger generation, younger children make up a large portion of the population and are increasingly being exposed to SVOD services. In 2019, it was estimated that 40.66% of households had children under the age of 18 in the US.2 Within this demographic, access to devices has significantly increased among children. According to a report done by Common Sense Media, 98% of children under the age of 8 live in houses with access to mobile device or a TV.3 Coupled with the fact that in 2018, 68% of families were subscribed to at least one SVOD service, SVOD viewership among younger children will inevitably increase significantly in the coming years.4 By focusing on developing content for the younger demographics, Disney+ will be able to effectively take advantage of these trends versus competitors.
Unparalleled exclusive content
As mentioned previously, Disney’s content library is extensive, and their studio has had great success. Disney is the first film studio to make over $5 billion consecutively over three years. In 2016, Disney also broke the record for highest grossing year, generating $7.6 billion. This suggests box office success will be a key driver for Disney+ adoption. While Pixar and Lucas entertainment have been successful, Marvel has been the main driver for box office sales. Since the debut of Marvel’s cinematic universe in 2008, Marvel has had at least one movie rank in the top 10 for box office sales every single year. Just this year, Avengers: Endgame became the fastest film to gross $2 billion. Looking into the future, Marvel will continue to be Disney’s cash cow and produce results. Furthermore, even stronger than Marvel’s box office success is their cultural impact. From challenging movie storytelling to popularizing end credit scenes, Marvel has made a significant impact on the film industry. Its 22 intertwined films have captivated moviegoers and have developed quite a following among audiences. Marvel does a great job of not only appealing to traditional comic fans but also introducing newcomers to the MCU.
Watching Marvel films has become a norm among today’s moviegoers, and box office sales cement the MCU as being the most popular series in today’s film industry. This type of brand loyalty is akin to that of TV shows and will drive subscriptions for Disney+. To further understand the value that Marvel adds to Disney+’s success, consider HBO Now and Game of Thrones. HBO Now is the streaming service that was released by HBO in 2015 and features programming available on the HBO platform. The platform’s content is restricted to HBO, similar to Disney+. While not being at the top of the market, the main driver behind the platform’s success has been Game of Thrones (GoT). Much like Marvel, GoT is widely watched by audiences and is one of the most popular television shows. When looking at HBO Now’s subscription rates over the years, they jump significantly during the years in which Game of Thrones is featured. In 2017, subscriptions to HBO Now jumped up by 91% following the release of season 7.5 This demonstrates the impact that even one successful franchise can have on subscription numbers. While not a direct comparison, Marvel and GoT command similar levels of viewership loyalty, with fans eager to be the first to watch upcoming productions. However, unlike GoT, Marvel is accompanied by other successful franchises produced under Pixar and Lucas Films, which will create sustained subscriber growth.
Strong Brand Value
In a market filled with proven competitors, can Disney’s brand command viewers to adopt Disney+? Disney’s brand value will drive subscriber growth despite the number of competitors in the SVOD streaming market. The brand was ranked 14th in the world by Interbrand and its brand value in dollar amount has been increasing: it increased from $27.1B in 2004 to $39.8B in 2018. Disney’s studio property, for example, has been a main driver behind the company’s success, as Disney aggressively monetizes them through multiple channels. Take Frozen: in addition to its 1.3 billion USD gross at the box office, Disney has capitalized on the film’s success by releasing merchandise, songs, an ice show, and books. Frozen merchandising sales alone were estimated to be around $1 billion, almost equalling box office sales. The strength of Disney’s characters across multiple channels demonstrates Disney’s universal appeal which translates to higher Disney+ subscribership. Disney fans are captivated by their characters and will be willing to pay additional monthly fees to add Disney+ to their SVOD lineup.
Furthermore, fans have already demonstrated demand for easily accessible Disney content. Looking at Disney’s home video sales, they have greatly outperformed the home video market. While international physical home entertainment spending decreased by 36% from 2015 - 2018, Disney’s home video sales have only decreased by a mere 3% across this period. This suggests that the Disney brand resonates strongly with its audience, and can generate sales within a declining market. Moreover, steady home video sales are indicative of the demand for on-demand Disney content. Coupled together, Disney+ will take advantage of an already existing demand for content, and further capitalize on its strong brand.
Impact of Disney+ Launch
All things considered, the timing for Disney+’s launch is perfect. After the launch of the platform, Disney + has garnered over 10 million subscribers in about a week. Within hours of launch, Netflix lost about 3% of its market share. The company’s digital infrastructure, successful content library, and strong family brand are ripe to be capitalized on, especially when considering the increasing use of SVOD services. Disney once again has shown its ability to adapt and innovate in an ever changing market.
- 1Littleton, C. (2017, October 16). Netflix to Boost International Kids Content as Viewership Spikes. Retrieved from https://variety.com/2017/tv/news/netflix-kids-guillermo-del-toro-trollhunters-andy-yeatman-1202590366/
- 2Duffin, E. (2019, November 22). Percentages of U.S. family households with children, by type 2019. Retrieved from https://www.statista.com/statistics/242074/percentages-of-us-family-households-with-children-by-type/
- 3Common Sense Research: Common Sense Media. (2019, November 4). Retrieved from https://www.commonsensemedia.org/research/the-common-sense-census-media-use-b3
- 469% of U.S. Households Have an SVOD Service. (2018, August 27). Retrieved from https://www.leichtmanresearch.com/69-of-u-s-households-have-an-svod-service/
- 5Vena, D. (2019, April 9). Winter Is Coming for HBO Subscriptions Once "Game of Thrones" Ends. Retrieved from https://www.fool.com/investing/2019/04/09/winter-is-coming-for-hbo-subscriptions-once-game-o.aspx