Disney+ Sets Its Sights on a Galaxy Not So Far Away

Since its launch in 2019, Disney+ has moved up the ranks past more than 300 streaming services, proving that it is a premium contender with streaming heavyweights such as Netflix and Amazon Prime.

While Disney+'s content may have enabled it to surpass stablemate Hulu in the 2021 rankings, its position also underlines the collective dominance of the Disney Bundle, which includes Hulu, Disney+, and ESPN+. Taking all the Disney-owned streaming properties together, for instance, Disney reaches 52% of households, second only to Netflix.

In contrast to Netflix's recent subscriber losses, Disney+ claimed record subscriber growth between April and June 2022, garnering over 14 million users during the period. As the fourth quarter of 2022 approaches, recent Disney content releases and announcements, as well as company news and streaming updates, might help Disney maintain its upward momentum and further distinguish itself in the competitive online video industry.

Iconic Brands Marvel, Star Wars, and Indiana Jones Drive Content Strategy

In September, Disney hosted Disney+ Day, which the business defines as an annual celebration of the Disney+ worldwide community. The daylong event was held initially in November 2021, coinciding with the two-year anniversary of the streaming service's debut. This year, however, Disney altered the date to serve as a lead-up to its swiftly sold-out D23 Expo, which returned in person for the first time since the beginning of the pandemic.

While both the two events highlight discounts and deals, each of them primarily focuses on content, including premieres and previews of forthcoming movies, television programs, and unique reality programming. Disney also announced new titles coming through 2024, including several Star Wars and Marvel titles, sequels to iconic films from prior decades (Hocus Pocus 2, Indiana Jones 5), and original Disney programs were also announced, including TV series based on the National Treasure and Percy Jackson movies.

The forthcoming films and TV series contribute to Disney's strategic objective of growing its subscriber base beyond families. Hocus Pocus and Indiana Jones can attract older users by appealing to their nostalgia. While movie sequels and reboots aren’t new, this sentimentality-driven strategy has proven especially successful during the years of the pandemic. Disney intends to capitalize on consumer interest by creating more unique and curated content for an older demographic as this content pulls them in.

September also saw the premiere of Season 31 of Dancing with the Stars on Disney+. The season is presently being livestreamed on Disney+, making it the first series to have a live run on the streaming service. The transition of Dancing with the Stars from ABC to Disney+ exemplifies the migration of live linear content to streaming channels as conventional television continues to lose viewers. This is a crucial step for Disney+, as it joins Amazon Prime, Peacock, and Paramount+ in adding live/linear content – only Netflix remains among the top SVOD-first streaming services with no live content. With ownership of both ABC and streaming services, Disney can experiment with the most profitable distribution of live series. It has the potential to attract new subscribers to Disney+ with a live series while also generating advertising dollars with its forthcoming ad-supported tier to offset revenues the content previously generated through television distribution.?

Frontierland is Based on Ad Revenue

As competition has intensified and the streaming wars have escalated, providers are experimenting with hybrid business models to win market share and improve their user and income bases. In addition to its SVOD subscription, Disney+ will launch a new ad-supported tier in December. Its primary motivation is to assist the service in reaching its target of 260 million customers by 2024. SVOD continues to dominate the OTT market, but ad-supported and hybrid models are gaining popularity, transferring traditional TV advertising money to streaming. Overall, hybrid and ad-supported models have become the second and third most popular OTT business models on the market, after SVOD providers. Increasing numbers of customers are using these hybrid models to save costs on their streaming bill while still satisfying their desire for streaming content.

Hybrid solutions, particularly those that include AVOD or FAST, allow for rapid viewer acquisition and a "try before you buy" experience with the content offering. Advertisers can reach a broad or targeted audience, depending on the streaming service, while consumers have access to an abundance of free content. Peacock, for instance, was an SVOD service at launch but also offered a free, ad-supported streaming option to raise awareness. Consequently, both advertisers and subscribers contribute to the revenue generated by OTT streaming services. OTT streaming services like Disney+ that have a vast library of content and a large install base of users ready to pay for it benefit from SVOD and AVOD hybrid models.

September continues to be a significant month for Disney, with the start of the 2022-23 college and NFL football seasons on ESPN and ABC, which is vital for ad income. During its May upfront event, Disney highlighted autumn premieres of premium entertainment to collect $9 billion in advertising commitments, the highest sum in the company's history. Disney attributed its huge upfront win to the launch of its advertising-supported tier. The ad-supported tier is helping to increase Disney's profitability, proving to be a worthy investment. December and the subsequent months will demonstrate if subscribers remain.

The Ultimate Disney Experience

Additionally in September, Disney acknowledged that it is considering methods to combine streaming and in-person experiences. The company has begun integrating the experiences in subtle ways. Beginning in September 2022, Disney+ customers will enjoy a 20% discount on Disney Resort hotels booked for the Christmas holiday season. In an interview with Deadline conducted in September, Disney CEO Bob Chapek commented on the company's integration approach.

“If we can have a universal guest experience, recognize that a person who spent seven days in the park, 24 hours a day, and we know all that information about them, is the exact same person who watches XYZ on Disney+,” he said, “we can now customize and personalize an experience way beyond anything we’ve ever been able to do before, bringing now the two pieces of The Walt Disney Company into one for one common guest experience … Disney+ will become a platform for consumer engagement with The Walt Disney Company, not just a movie service platform.”[1]

An integrated experience is a vague component of Disney's overall vision today; the company gave few additional details about further integration of its digital and physical operations. However, the pandemic compelled the firm to close its parks and attractions, during which time Disney+ and other streaming services achieved tremendous subscriber growth. Guests are once again visiting Disney parks, cruise lines, and resorts that were unavailable during the outbreak now that the world has "reopened." With the transition to outside-the-home activities, streaming adoption has started to slow. Disney’s vision of a hybrid experience that combines digital and physical elements builds a more secure foundation for the future and makes the Disney fan experience even stickier.

The timing of a fuller integration of its streaming and in-person experiences—including credit card benefits and vacation club rewards—is unknown. But, this move puts Disney on a similar path to Amazon, with member benefits reaching across various company assets. Expect to see other media conglomerates follow suit – for instance, Comcast/NBCUniversal can offer benefits across its internet and mobile services, home security and smart home solutions, and Universal Studios amusement park.

Disney Could Become a Giant Slayer

Disney+ is still a relatively young streaming service, so its growth at this stage is crucial. And unlike Netflix, Disney+ is not seeing a decline. Until it hits a saturation point in the US, which may still be millions of subscribers away, the streaming service will likely continue to expand in North America and internationally.

Disney has the opportunity to extend its base of loyal fans further by introducing a seamless Disney experience, ad-supported streaming models for price-conscious subscribers, and more personalized experiences. In doing so, Disney+ aims to create the ultimate competitive advantage to secure its position as the leading entertainment destination.

This is an excerpt from Parks Associates OTT Video Market Tracker, with contributions from Eric Sorensen and Tameshia Williams .

[1] https://deadline.com/2022/09/bob-chapek-disney-disney-disneyland-1235119326/