Yesterday Disney and Verizon unveiled a promising new deal–the telecom giant will offer its customers a one-year free subscription to Disney+’s new streaming services, starting the day of its launch on November 12th. The deal is a key signal that the company is willing to lose some immediate sources of profit in order to better position itself to survive the streaming wars.
Analysts expect Disney+ to have nearly 18 million subscribers by the end of 2020, with the company returning to profitability on the service by 2024. Disney currently projects between 60 and 90 million global steaming subscribers by that time (for reference, Netflix had 83 million subscribers within five years of its offer of a standalone streaming service).
Disney’s service has already spent considerable money on technology and content in order to position itself well. Thus far, $2.6 billion has been invested for streaming technology and spent $71.3 billion for 21st Century Fox’s assets, and the company gave up a reported $150 million in annual income by ending its deal with Netflix.
In a research note quoted by The Hollywood Reporter, media analyst Michael Nathanson discussed Disney’s moves including the new Verizon deal:
“Rarely has a company willingly created this much financial disruption in strategically pivoting to a new business model.”
According to Nathanson’s research, Disney could net up to 9 million additional US subscribers if even half of Verizon’s mobile and internet consumers choose to purchase Disney’s service after this first free year deal.
Is Disney set to lead?
Disney is clearly positioning itself to make gains in the long term in order to challenge a thriving Netflix (and to hold ground against other competitors). Central to their strategy thus far is an emphasis on price backed by their rich content library (recently multiplied by their acquisition of Fox) and a host of new original content (particularly regarding Marvel and Star Wars properties).
These positive developments aside, Disney will still face a challenge in recouping such a high level of up front costs while competing against a massive industry leader (and with additional major competitors on the horizon). WarnerMedia’s HBO Max and NBCUniversal’s Peacock are also netting large scale original content deals alongside their near century-long back catalog of content. Who will win the Streaming Wars? Hard to say in the short term, but Disney is certainly well-positioned to thrive in it.