Jon Erlichman

Anchor

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Walt Disney Co. begins a new chapter today, with the launch of its much anticipated streaming service, Disney+. Longtime chief executive Bob Iger sees it as a pivotal moment in the company’s 96-year history. 

“We’re making a huge statement about media and entertainment and our continued ability to thrive in this new era,” Iger told analysts on the company’s recent earnings conference call.

In many ways, Iger has been preparing for the launch for more than a decade. During his time at the helm, Disney has acquired a stable of powerful brands including Pixar, Marvel, Lucasfilm and, most recently, much of 21st Century Fox’s empire for US$71 billion.

To become a distributor, Disney also acquired a majority stake in BAMTech in 2017.  That business, now called Disney Streaming Services, has helped Major League Baseball, HBO, WWE and others launch successful streaming offerings. The direct-to-consumer technology also powers Disney’s ESPN+ streaming service, which launched last year.

The combination of technology and brands has enabled Disney to create a binge-worthy service, which offers more than 500 movies and 7,500 hours of library television content. In addition, Disney has produced 10 original movies, specials and series for the service, including The Mandalorian, a live-action Star Wars show from director Jon Favreau, which reportedly cost US$100 million for 10 episodes.

Iger had a front row seat in observing the rise of Netflix Inc.  In 2012, Disney agreed to a lucrative deal to provide its content to the streaming service, which then had 30 million subscribers.  The two sides have since parted ways, while Netflix’s subscriber base has climbed to roughly 164 million users worldwide (paid and free trials). 

“Disney knows it needs to take this risk right now because the bigger risk is not making this streaming bet at all,” Bloomberg Intelligence analyst Geetha Ranganathan told BNN Bloomberg in a recent television interview.

Disney predicts its service will grow to between 60 and 90 million subscribers over the next five years. To help make that happen, Iger told analysts on the company’s earnings conference call that Disney has launched an “unprecedented marketing campaign.” Disney has also sought out distribution partners such as Apple, Google, Microsoft, Amazon, Sony, Roku, Samsung and LG.

Of course, launch costs coupled with the costs to create original content has resulted in some big spending ahead of the Disney+ launch.

“It’s a very expensive proposition to launch a new streaming offering,” Tuna Amobi, media and entertainment analyst at CFRA Research, told BNN Bloomberg in a recent television interview.

“We saw that in the huge losses in their direct-to-consumer segment in their latest quarterly results.”

Despite the red ink, Amobi is upbeat on Disney+ and expects the service to hit its long-term subscriber forecasts.

Investors are also optimistic, with Disney’s stock price up nearly 20 per cent since details of the service were first unveiled in April.

“The big catalyst for Disney right now is the Disney+ service,” Ranganathan said.

Meanwhile, few are as confident on the rollout as Iger, who recently told analysts Disney's success over the years is tied to its willingness to embrace change.

“It’s part of Disney’s DNA and it helps keep us relevant to each new generation while also creating new opportunities for growth,” he said.