Subs Dive Lower

Halloween may be Oct. 31, but the real thriller in Hollywood will hit in November.

Disney+ and Apple TV+ are in a sub battle to the pricing floor. After Disney+ announced its Nov. 12 launch at $6.99 a month, with special offers dipping below $4 a month, Apple TV+ Sept. 10 an­nounced it would launch its SVOD service Nov. 1 (more than a week before Disney) at $4.99 a month, below regular pricing for Disney+ and approaching the special offer cost.

Not coincidentally, Disney CEO Bob Iger resigned from the Apple board the same day.

The two services, vying to take on the likes of streaming giants such as Netflix (with pricing starting at $8.99 a month) and Amazon Prime (a free add-on to its shipping fee), seem to have made the calculation to charge practically nothing for premium streaming content.

The moves could further lower con­sumers’ perceived value of content in general. Over the years, studios have fought outfits that devalued their con­tent. Now, Disney and several others are joining some of the low-priced markets they previously vilified — and undercutting them.

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Certainly, entering the streaming market offers additional value other than subscription revenue. Disney and others will gather a treasure trove of data on their customers, and perhaps will find new ways to better target and monetize content.

Giving away a library of titles for the price of a gallon of milk each month is certain to attract con­sumers, but it’s a gamble that could undermine the value of the studios’ core product.

Bob Iger Steps Down From Apple Board as Streaming War Heats Up

On the heels of Apple’s launch and pricing announcement about its new streaming service, the tech giant has announced that Walt Disney Co. CEO Bob Iger has stepped down from its board.

In a Sept. 13 SEC Filing, Apple disclosed that Iger resigned Sept. 10.

Apple Sept. 10 announced its service Apple TV+ would bow Nov. 1 — a little over a week before the launch of Disney’s streaming service Disney+ Nov. 12 — and at $4.99 — undercutting Disney+’s $6.99 a month regular price (although special offers put the cost under $4 a month).

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Disney Brass Surprised at Fox Studio Underperformance

Back when Rupert Murdoch weighed in on 21st Century Fox fiscal calls, the senior media mogul was quick to praise the success of movies such as Avatar and Planet of the Apes. He was also quick to dismiss box office misses as part of a studio’s rollercoaster existence.

The fickle nature of theatrical releases in an age of over-the-top video, ultimately, is one of the reasons Murdoch put Fox Studio up for sale along with other media assets.

Disney’s $71.3 billion acquisition of 20th Century Fox Film Corp. was in part for the studio’s catalog, majority ownership of Hulu and future box office releases.

Apparently, Disney CEO Bob Iger and CFO Christine McCarthy weren’t prepared for a fiscal downturn at Fox Studio so soon after completion of the acquisition earlier this year.

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On the Aug. 6 fiscal call McCarthy disclosed that Fox posted a third-quarter (ended June 29) operating loss of $170 million — the opposite of a projected $180 million operating profit.

“One of the biggest issues we faced in the quarter was the performance of the Fox film business,” Iger said. “It was well below what it had been and well below what we thought it would be when we did the acquisition.”

Disney was quick to lay the blame on Dark Phoenix, whose reported $200 million production budget dwarfed its $65.8 million domestic box office. The film did generate more than $252 million internationally.

“I know what happens when a company gets bought,” Iger said, “Typically, operations and decision making comes to a halt. We avoided that when we acquired Pixar and Lucasfilm, but this was a very different position for Fox.”

Indeed, Disney announced the Fox deal in 2018, but the transaction wasn’t finalized until this March. While Fox will likely bounce back theatrically (Iger has high hopes for Ford vs. Ferrari), in the meantime, Disney’s theatrical prowess shows no sign of slowing.

With Marvel, Pixar and Lucasfilm content overperforming, Disney has generated a record $8 billion at the box office thus far in 2019.

USC Annenberg Dean Willow Bay to Receive DEG Hedy Lamarr Award

Willow Bay, dean of the USC Annenberg School for Communication and Journalism, will receive the third annual “Hedy Lamarr Award for Innovation in Entertainment Technology” from DEG: The Digital Entertainment Group this fall.

The DEG created the Innovation Award to recognize female executives in the fields of entertainment and technology who have made a significant contribution to the industry.

The DEG also will present the “Hedy Lamarr Achievement Award for Emerging Leaders in Entertainment Technology,” which recognizes female college students whose studies in the fields of entertainment and technology have shown exceptional promise. Maya Tribbitt, who is earning her bachelor’s degree in journalism and international relations at USC Annenberg and the USC Dornsife College of Letters, Arts and Sciences, will receive the Emerging Leader honor along with a financial award to continue her education.

The awards will be presented in Los Angeles to coincide with the 105th anniversary of Lamarr’s birth Nov. 9, 1914.

“We are thrilled to present DEG’s 2019 Hedy Lamarr Awards to Dean Willow Bay, for her traditional and digital platforms, and USC student Maya Tribbitt,” said DEG president and CEO Amy Jo Smith in a statement. “These communicators truly embody Hedy Lamarr’s dedication to innovation in media and technology.”

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Bay, a broadcast journalist, is the first female dean of the USC Annenberg School for Communication and Journalism and holder of the Walter H. Annenberg Chair in Communication. Since joining the USC Annenberg faculty in 2014 as director of the School of Journalism, she has launched the school’s state-of-the-art Media Center in Wallis Annenberg Hall, expanded the school’s partnerships with key media and technology partners, and accelerated curricular innovations, including an expansion of the school’s experiential education and career development programs, according to the DEG. Bay’s work to ensure that current and future communicators are fluent writers across many digital platforms was recognized with the Award of Honor from the PEN Center USA. She is married to Walt Disney Co. CEO Bob Iger.

“I am honored to receive this award inspired by Hedy Lemarr’s relentless commitment not only to pushing the boundaries of invention, but also to forging new roles for women in the entertainment and technology industries,” Bay said in a statement. “At USC Annenberg, we prepare our students to lead with this same level of intelligence, curiosity and courage as they shape the future of media, technology and culture.”

Austrian-American actress Lamarr was a Hollywood legend who is best known for her roles in film classics including Samson and Delilah, The Strange Woman and Tortilla Flat. She was also a lifelong inventor whose innovative work included pioneering “frequency hopping,” which became the foundation for spread spectrum technology. Conceived by Lamarr and composer George Antheil for radio guidance systems and patented in 1942, this highly secure technology resists interference and dropout, and is utilized today for a variety of cellular, Wi-Fi and Bluetooth applications.

To determine the award winners, DEG enlisted its Canon Club Advisory Board, which comprises a cross-section of leaders representing the entertainment, technology, IT and consumer electronics industries. Among other factors, the judging panel based its decisions on the candidates’ embodiment of the principles of innovation, engagement and excellence.

‘Toy Story 4’ Box Office Debut Bodes Well for Home Video

Disney/Pixar’s Toy Story 4 quietly opened with a reported $118 million gross at the North American box office — on par with the 2010 opening weekend for Toy Story 3, which went on to generate $415 million domestically.

The fourth installment of the animated toy-talking franchise, which began in 1995 with Tom Hanks and Tim Allen supplying the voices to memorable characters Sheriff Woody and Buzz Lightyear, respectively, and Randy Newman’s Oscar-nominated soundtrack, continues Disney’s theatrical success following Captain Marvel, Avengers: Endgame and Aladdin.

The title also portends success for Walt Disney Studios Home Entertainment, which has established a lucrative business selling “Toy Story” DVD and Blu-ray Disc units, among other formats.

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The original Toy Story — directed by John Lasseter — ranks the 8th best-selling VHS title with more than 19.5 million units sold for $463 million in revenue (based on inflation) since its Oct. 29, 1996 retail release. It was also released on Laserdisc.

It is the 12th best-selling home entertainment release with 5.65 million combined DVD/Blu-ray Disc units sold since its March 20, 2001, DVD release and Blu-ray on March 23, 2010.

The title was released on the defunct Universal Media Disc (UMD) format on Sept. 6, 2005.

Toy Story 2 was released at retail in 1999, with a special edition re-release on Jan. 11, 2000. It generated $42.2 million in domestic DVD sales; $16.3 million in Blu-ray.

Toy Story 3 sold 10.8 million discs for $192 million in revenue, and was the No. 2 selling disc in 2010. Overall, the title sold $184 million worth of DVDs and $53.2 million on Blu-ray, according to The-Numbers.com.

Indeed, when asked whether franchise films such as Toy Story 4 would be fast-tracked to Disney’s pending subscription streaming service, Disney+, CEO Bob Iger told CNBC in April that there was little financial incentive to do so.

“Don’t forget, in that [home video] window after it’s available in first theatrical run, these movies will be available for a form of rental or download or purchase,” Iger said. “Physical copies are still being sold.”

Disney to Join Growing Hollywood Bandwagon Ceasing Operations in Georgia Should Anti-Abortion Ban Take Effect

The Walt Disney Co. could join Netflix and other Hollywood actors and production companies who say they would stop working in Georgia should a recently signed anti-abortion law take effect on Jan. 1, 2020.

Speaking to Reuters, Disney CEO Bob Iger was asked if Disney would continue to make movies (Black Panther) and TV shows in the state should statewide legislation outlawing a woman to abort her pregnancy after six weeks become law. Georgia currently bans abortions after 20 weeks.

Georgia Gov. Brian Kemp signed the legislation on May 8.

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“I think many people who work for us will not want to work [in Georgia] and we have to heed their wishes in that regard,” Iger said. “Right now we’re watching it very carefully. I don’t see how it’s practical for us to continue to shoot there.”

Disney’s possible departure from Georgia could be a major blow to the state’s lucrative film business, which employs thousands and generates billions in annual revenue by offering studios generous tax incentives.

In addition to Panther, Marvel Studios Avengers: Endgame, Captain America: Civil War and Guardians of the Galaxy 2, among others, filmed in the Peach state.

Disney’s possible pullout of Georgia is reminiscent of a similar ploy when Georgia lawmakers attempted to ban same-sex marriage within the state.

Disney came out against the proposed legislation, claiming it was an affront to personal civil liberty.

“Disney and Marvel are inclusive companies, and although we have had great experiences filming in Georgia, we will plan to take our business elsewhere should any legislation allowing discriminatory practices be signed into state law,” a spokesperson said at the time.

Then Georgia Gov. Nathan Deal quietly vetoed the legislation.

Bob Iger: Disney Prepared to ‘Pivot’ in New Direction with Hulu Ownership

Disney’s acquisition of Comcast’s 33% stake in Hulu for total control of the SVOD platform is part of the Mickey Mouse company’s move toward engaging with consumers directly, CEO Bob Iger told an investor group.

The transaction also enables Disney to roll out Hulu and Disney+ internationally unfettered by possible conflicts with Comcast’s ownership of Sky and streaming service Now TV.

Speaking May 14 at the 6th Annual MoffettNathanson Media & Communications Summit in New York, Iger said full control of Hulu (and Hulu with Live TV) coupled with ESPN+ and Disney+ streaming service (launching Nov. 12) would enable the company to target consumers separately through sports, TV content and movies, or collectively in a digital bundle.

“Managing your customers seamlessly across platforms, I think, has real value,” Iger said. “We have the ability to leverage the content engines in the company [Fox, FX, ABC, Disney, etc.] in a significant way here.”

For example, the executive envisions content creators such as FX and ABC producing programming for streaming on top of their pay-TV and broadcast channels.

“There’s a lot to this [internal synergies],” he said.

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Iger said his focus on direct-to-consumer distribution occurred on a “fateful” day in August 2015 when he claimed to be “rather candid” on an earnings call about the state of the pay-TV ecosystem, and ESPN in particular.

“We were seeing the disruptive effect of technology on traditional businesses,” Iger said, adding that none of the Disney business units (i.e. movies and TV shows) at the time — outside of the Disney Store and theme parks — interacted with the consumer directly.

“We decided we should be in the direct-to-consumer business,” he said, adding that theater operators, pay-TV operators, big box stores and ecommerce platforms have “known and owned” the Disney customer.

“We didn’t and we thought it was a big hole in terms of the company’s value proposition,” Iger said.

That realization prompted Disney to make an initial investment in BAMTech, which later (2017) morphed into complete ownership of the streaming tech company powering HBO Now, MLB.tv and NHL.tv, among other OTT platforms.

“Knowing essentially who [Disney’s consumers] are, we think we can create more value for the company and for them,” Iger said.

Streaming Red: Disney’s OTT Venture Down a Fiscal Black Hole

NEWS ANALYSIS — Disney bought Marvel Studios in 2009 for $4 billion. It bought Lucasfilm (“Star Wars”) for another $4 billion three years later.

The acquisitions helped Disney reign supreme at the box office in 2018, 2017 and 2016, according to data from BoxOfficeMojo. And it has a commanding lead in 2019 thanks to Avengers: Endgame.

At the same time, the Mickey Mouse company is set to lose more than $2 billion on streaming investments — “Disney Streaming Services” (formerly BAMTech), Vice Media, ESPN+ and Hulu — before it even launches its much-ballyhooed new $6.99 monthly SVOD service Disney+ in November.

Earlier this year, Disney CFO Christine McCarthy said ESPN+ is projected to lose $650 million annually through 2020. The company just wrote-off more than $300 million on its minority stake in Vice Media.

And the much-hyped Disney+ SVOD platform is not projected to become profitable until 2024 — three years after CEO Bob Iger plans to retire.

“Streaming requires a strong stomach for losses, especially as you are playing catch-up,” Rich Greenfield, analyst at BTIG Research, told CNBC earlier this year.

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Down the OTT Rabbit Hole

As Disney saw Netflix growing exponentially worldwide — much of it based on streaming movies and TV series based on Marvel intellectual property, it switched its business focus from SVOD enabler to over-the-top provider.

Indeed, Iger says OTT video is the company’s No. 1 focus in 2019, regardless of the financial hits to the bottom line.

Hulu, which Disney majority owns along with Comcast, lost $580 million in 2018, while BAMTech, the backend tech firm acquired from Major League Baseball Advanced Media in 2017, spearheaded another $470 million operating loss for the company’s new direct-to-consumer and international operating unit (which also includes home entertainment).

And the fiscal hits continue.

DTC & International lost $393 million in the most-recent fiscal quarter (ended March 31), up from $188 million loss in the previous-year period. Through the first half of the fiscal year, DTC has lost $529 million, twice as much was lost in 2018.

“We expect our direct-to-consumer businesses to have an adverse impact on the year-over-year change in segment operating income,” McCarthy said in an understatement on the May 8 fiscal call.

Disney, of course, can arguably absorb the losses. It generated a $12.5 billion profit on almost $60 billion in revenue in 2018. That was before closing the 21st Century Fox transaction, which could help Disney reach $100 billion in revenue.

At the same time, the Fox acquisition upped Disney’s long-term debt from $18 billion to about $52 billion. Disney is also expecting about $2 billion of cost synergies absorbing 20th Century Fox Film Corp. and related businesses.

Thus far, Wall Street appears supportive, contending the Disney brand has the best chance of narrowing the SVOD divide with Netflix.

“I think Wall Street is at least accepting of the fact that we’re doing this, that it’s the most important thing we’re doing,” Iger told Barron’s in January. “And while I won’t say they’re cheering us on, they’re definitely giving us the room to prove that we can do it.”

Marvel Studios ‘Avengers: Endgame’ Streaming on Disney+ Dec. 11

The Walt Disney Co. May 8 announced it would make the current theatrical blockbuster Avengers: Endgame, from Marvel Studios, available on its pending direct-to-consumer streaming video platform Disney+.

Disney CEO Bob Iger said the $2.2 billion (gross to date) movie would be available on Disney+ Dec. 11 – one month after the platform’s November launch.

Avengers: Endgame has generated $644.5 million in domestic ticket sales in just 12 days of release.

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Iger previously announced the SVOD service would launch with Marvel Studios’ Captain Marvel, starring Brie Larson, in addition to Black Panther and other studio hits.

Iger said Disney “did some deals” with third parties (including Netflix) to expedite the return of select titles under license agreement. He said the company remains in discussions about assuming control of other titles still under license agreement.

“We continue to explore ways that we might be able to get more back,” he said, adding that the film slate announced on its investor day already included some of the titles — notably Black Panther and Captain Marvel.

Iger said that the original landmark license deal with Netflix for its original theatrical releases included a window for early release of some titles.

“When we did the Netflix deal … even though at that point it was far off, the possibility that one day we might want to launch our own service, we carved the ability to run films on such a service,” he said. “And it paid off.”

Separately, CFO Christine McCarthy said that despite Endgame‘s impressive box office run, the film’s profitability would be initially tempered by more than $350 million in production costs, excluding marketing and theatrical revenue sharing.

Disney Re-Names BAMTech ‘Disney Streaming Services,’ Outlines Direct-to-Consumer Strategy

Disney April 11 announced it has renamed its BAMTech backend technical company “Disney Streaming Services” as part of the 96-year-old media giant’s expansion into direct-to-consumer business.

Acquired for $2.5 billion in 2017 from Major League Baseball Advanced Media, BAMTech has powered numerous OTT services, including HBO Now, MLB.tv, PGA Tour Live, ESPN+, and NHL.tv, among others.

“This is an exciting day for the entire Disney family. It is also a challenging time,” CEO Bob Iger told attendees at the start of a three-hour investor day presentation in Los Angeles.

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The executive reiterated that Disney is entering the DTC ecosystem from a “position of strength, confidence and unbridled optimism.”

Iger said Disney is banking its future in part on digital distribution, including a new corporate segment — Direct-to-Consumer & International — featuring the pending Disney+ SVOD service, ESPN+, Hulu, Hulu with Live TV and Asia’s Hotstar ad-supported VOD platform with 300 million actively monthly users.

Kevin Mayer, chairman of DTC & International, said Disney’s foray into digital is based in part of a projected 1.1 billion high-speed Internet households worldwide by 2020 compared to 700 million in 2015.

Mayer said there will be 810 million DTC paid subscribers globally by the end of 2020 — growing 30% annually. With 1.2 billion hours of video streamed daily projected by 2020 compared to 260 million hours in 2015 — up 50% annually over a 10-year period.

[DTC] is becoming a crowded marketplace, in which brands matter more than ever,” Mayer said. “We have the brands that matter most when it comes to great entertainment.”

Mayer said Disney three domestic DTC products — Disney+, ESPN+ and Hulu — would target different market segments as standalone services and “likely be bundled to create even more value to consumers.”

Disney is eyeing a Latin America launch for ESPN+ as well.

Launching in November, Disney+ will feature catalog, current and original content from Disney, Marvel, Pixar, Lucasfilm and National Geographic — the latter due to Disney’s $71.3 billion acquisition of 20th Century Fox.

Mayer said Hulu, which Disney assumed majority ownership stake following the Fox acquisition, represents Disney’s most-established DTC product.

“We’re actively evaluating international rollout strategies for [Hulu],” he said.

Disney said Hulu was the fast-growing domestic SVOD service in 2018, ending the year with 25 million subscribers since launching in 2008. Online TV service — Hulu with Live TV — launched in 2018. Viewing increased by 75%.

“Hulu is going to give consumers the right product at the right price,” said Hulu CEO Randy Freer.