Issue 21: The streaming wars, volume 2

August 30, 2019

Disney+'s imminent arrival means the streaming wars — once fought solely between Hulu And Netflix — have entered a new chapter. In this week's issue, we'll explain what Disney+ is offering at what price (and why it's pricing the service the way it is) and consider it's impact on Netflix and the overall streaming universe.

In light of last week's news from the Business Roundtable, we'll read NYU Stern professor Aswath Damodaran's take. Then, we'll consider what octopi have to teach us about ideal system design in the machine age and look at Starbucks' logo evolution.


DISNEY+ IS BIG AND ROBUSTLY SUPPORTED

Disney+ is almost here — and launches on November 12 (just in time to piggyback on the marketing for Disney's big-budget holiday season films Frozen 2 on November 22 and Star Wars: The Rise of Skywalker on December 20). Disney revealed select details about its upcoming streaming service at D23 Expo, Disney's biennial fan convention, over the weekend during which attendees were able to preregister for Disney+ before discounted online preorders opened on Monday.

Deep content library and integration with other Disney streaming services
Disney+ will be a competitor to existing video streaming services such as Netflix, HBO Now, Amazon Prime Video, and Apple TV Plus. It'll be an ad-free service, and will give customers access to Disney's and Fox's legacy content as well as new, exclusive TV shows, movies, documentaries, and shorts. Thanks to Disney's ownership of Hulu and ESPN, it'll also have a bundle option to purchase Disney+, Hulu, and ESPN Plus together (more on that below).

Disney+ will include all of Disney's family-friendly content and much of its mass-audience material, including content from Disney proper, Marvel, Lucasfilm (AKA the full Star Wars franchise), Pixar, and National Geographic. It'll also have all 30 seasons of The Simpsons — a major win for Disney thanks to the Fox takeover. Going forward, Disney+ will be the only place to stream Disney's theatrically released moves, starting with Captain Marvel at the service's launch.

Initially, there will be 5,000 Disney Channel and Disney Junior TV episodes, 100 Disney Channel Original Movies, and some (but not all) older Disney, Pixar, Marvel, and Star Wars movies. Within a year, the entire Disney classics and Pixar libraries will be available.

Disney's other streaming services — Hulu and ESPN Plus — will also run on the same tech platform, allowing subscribers to subscribe to all three services with the same password and credit card information. Although all three subscriptions will be separate, Disney will offer a triple-service bundle for $13 a month (equal to the price of Netflix's most popular U.S. plan). FX Plus — which was previously a $6/month add-on subscription for Comcast and Cox cable subscribers — is a casualty of the merger, as Disney has designated Hulu as its spot for adult-oriented programming going forward.

Hulu will also benefit from the Disney+ launch: it'll be getting a new Marvel animated series for adults, as well as Deadpool (another addition to the Disney content library from the Fox acquisition). Hulu will continue streaming content from three broadcast networks, as well as its original series, such as The Handmaid's Tale and Castle Rock. ESPN Plus will, unsurprisingly, focus on sports.

Down the line, Disney still has room to add additional content to Disney+ from its massive library. For a sense of the depth and breadth of Disney's holdings, check out this map of the company's worldwide assets (and bear in mind that this infographic was created before the Fox merger, so Disney owns even more media assets now):

9853d5fd-0ca8-4c33-85cb-2124813f9880.png

Major franchises as content cornerstones
To beef up content offerings on Disney+, there are also a number of major originals in the works, all of which piggyback on major Disney franchises. In an addition to the Star Wars universe, Disney+ is planning The Mandalorian, a $15 million-per-episode series taking place five years after the events of The Return of the Jedi. To put the show's budget in perspective, consider this: Game of Thrones didn't reach that type of spending until its final season. There are also three additional Star Wars live-action series and one animated series in the works, although details are limited. Finally, Star Wars: The Rise of Skywalker, the ninth and final chapter in the nine-part Skywalker Saga, will be available on Disney+ within the service's first year after it premiers in theaters on December 20.

There will also be seven live-action series featuring the Avengers stars in their own shows, including:

  • A series with The Falcon and the Winter Soldier with Anthony Mackie and Sebastian Stan (fall 2020)

  • A Loki series starring Tom Hiddleston (spring 2021)

  • WandaVision with Elizabeth Olsen as Scarlet Witch and Paul Bettany as The Vision (spring 2021)

  • A Hawkeye series starring Jeremy Renner and Kate Bishop as a second Hawkeye (fall 2021)

  • Three more series based around She-Hulk, Ms. Marvel, and Moon Knight (release dates to be announced)

Nostalgic Disney fans are getting new content, too: those who grew up on Disney Channel mainstays like High School Musical and Lizzie McGuire will be excited to learn that new additions to those franchises are planned. For more on what else is coming to Disney+, read this roundup of the announcements that came out of D23.

Aggressive pricing paired with high-quality streaming
Disney+ is launching with an aggressive pricing strategy that may catapult it over Netflix. For those who commit to paying upfront for a three-year subscription through the "Founders Circle," the service will work out to $3.92 a month.

While this is a great deal for viewers, it's worth noting that not everyone agrees this is a smart strategy. Media analyst Rich Greenfield, for example, says:

a6fa21eb-f3cf-4d1e-aa02-a3211701dbed.png


Even at full price ($7/month), Disney+ will be half the price of HBO Now and be significantly discounted relative to Netflix ($12.99 for the Standard plan with HD quality).

It's also worth noting that, unlike Netflix, Disney+ will be high definition at all subscription tiers. At D23, the company revealed it'll offer 4K, UHD and High Dynamic Range streaming at all levels. Additionally, according to film blogger Eric Vespe, some titles will also be streamed in Dolby Atmos at no extra charge. On Netflix, subscribers pay almost $16 to get HD and Ultra HD streaming, and Dolby Atmos requires a premium subscription plan.

Leveraging physical presence to push streaming
To pique customer interest, Disney+ is using both its existing 300+ retail stores and a new venture to open 25 mini-stores in Targets across the country starting by October 4.

The Target mini-stores will be fully immersive, interactive customer experiences with seating areas where kids and families can listen to Disney music, watch Disney movie clips, and take photos in front of interactive displays. Like Disney theme parks, the mini-stores will help inspire purchase by giving customers a chance to actively engage with, and have fun with, the company's IP before purchase.

Disney will also likely use its proprietary physical spaces, including its theme parks, hotels, cruise lines, and more, to push Disney+ as well. Hints of this strategy were evident at D23, where there were kiosks allowing attendees to sign up for Disney+ at a 30% discount. To understand why this might make Netflix sweat, read Business Insider's analysis.

NETFLIX KILLER?

Opinions on what the launch of Disney+ means for the overall streaming landscape vary. Rich Greenfield (can you tell we follow him on Twitter?), argues that the addition of this service will accelerate cord-cutting as a trend, and doesn't necessarily believe that it'll be a zero-sum game:

b1bf6a4d-f03d-425e-8a6f-5d82f550bc45.png

However, it's also worth considering what Disney+ is taking away from other platforms. With Disney+ on the horizon, Netflix users will start to see less Disney content on the platform — and by late this year, most Disney content will be gone from Netflix.

Whether Disney+ will kill Netflix is up for debate, though. CNBC's Alex Sherman thinks it won't; but it will make it harder for Netflix to raise prices. The Motley Fool's Leo Sun is a bit less sanguine about Netflix's odds, as he thinks Disney+ will undercut Netflix on a pure cost-comparison basis. Needham analyst Laura Martin takes the most dire view of Netflix's future. In a note to clients, she wrote, "We project [Disney] will win (and [Netflix will] lose) the U.S. SVOD [subscription video on demand] battle." U.S. consumers have shown a reluctance to add to their three SVOD services. This implies that [Disney's] projected 20 million to 30 million U.S. [subscriptions] by 2024 will mostly come from Netflix's 60 million U.S. subs."


Extended Reading

From Shareholder wealth to Stakeholder interests: CEO Capitulation or Empty Doublespeak?
NYU Stern professor Aswath Damodaran sees three possible interpretations of last week's Business Roundtable announcement saying corporations should be run to protect all stakeholders, rather than merely shareholders. The three possible interpretations — public relations move, return to the past, and a conspiratorial twist — reflect varying degrees of cynicism about corporate leaders' motives. Ultimately, he concludes that the Business Roundtable's pronouncements and intentions either way aren't terribly important. Rather, he argues that it's on customers to make it in companies' financial best interests to behave better in their interactions with society, customers and employees. To achieve this, customers should buy products and services from companies that treat other stakeholders better and pay higher prices for such companies' shares.

Artificial Intelligence and The Rediscovery of Space and Time in Business
As both the volume and velocity of data increase, systems will need to become less centralized. The challenge of synchronizing intelligence in the future is summarized in the graphic below:

Source: BCG Gamma on Medium

Source: BCG Gamma on Medium

As machine intelligence becomes distributed throughout the world with only loose connections, a whole new architecture of decentralized autonomy and centralized control — akin to an octopus' decentralized intelligence — might provide inspiration for future business systems.

Starbucks just publicly deconstructed its brand — here's why
If you've ever wondered how Starbucks develops its marketing materials, brand voice, and more, this was your lucky week. For the first time ever, Starbucks' creative team has made the brand's full guidelines available to the public. Making brand identity public on microsite has been something of a trend lately: both Uber and Netflix did the same thing.

f9aa7816-dedb-433c-91c0-feed69c6f3d4.png