Disney CEO Bob Chapek Cites Home Entertainment Success as Key to Getting Closer to Consumers

For Bob Chapek, what’s old is new again.

Before Chapek become CEO of The Walt Disney Co., he was president of Walt Disney Home Entertainment and driver of a successful packaged-media marketing program that created demand for select Disney classic titles by keeping them temporarily unavailable via the “Disney Vault.”

Flash-forward to the present and Chapek has been focused in part on expediting Disney’s direct-to-consumer retail and streaming access. Speaking June 14 on the virtual Credit Suisse 23rd Annual Communications Conference, Chapek said the DTC business strategy — similarly to home video and transactional VOD in the past — is about getting closer to the consumer.

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Disney’s DTC unit includes streaming video services Disney+; Disney + Hotstar; ESPN+; Hulu; and Star+. The segment had more than 103 million combined subscribers, and posted revenue of $3.5 billion in the fiscal first quarter, up 73% from the previous-year period.

“It’s about having a granular understanding of what the consumption patterns are, and then speaking to the consumers in a way that’s going to be relevant to the content that they want specifically for themselves,” Chapek said. “And by doing so, we’ll drive engagement and consumption.”

Disney+ has taken baby steps into premium VOD, dubbed “Premier Access,” enabling Disney+ subscribers early access to select movies priced at $29.99 purchase-only price. Subsequent retail channels include transactional VOD, electronic sellthrough, DVD and Blu-ray Disc.

“In terms of the relationship that we have with our distribution partners, the key is having a strong symbiotic relationship, and that’s what we’ve got, as they really want Disney content and we bring that value to their platform,” Chapek said.

“So as long as we have a symbiotic relationship, where we bring something they need, we get something that we need. It’s a healthy relationship. And with the wide variety of content that we have in our machine, I think we’ll continue to have that very positive, very productive, very symbiotic relationship.”

When asked whether Disney might separate select Disney brands such as Marvel and Star Wars into standalone streaming platforms, Chapek said the aggregated business model, including combining Disney+, ESPN+ and Hulu into a specially-priced combo offering, is working.

“There is sort of a large overlap between people that like Marvel versus people that like Star Wars and people that like Disney,” he said.

“We won’t say no to anything in the future, but right now we’re really happy with our more highly aggregated model that we have, both from a cost standpoint and from a market opportunity standpoint. But again, who knows it could evolve over time as we learn more and more in different regions across the world.”

NBCUniversal, Telemundo Partner on Streaming Content Studio

NBCUniversal Telemundo Enterprises is creating Telemundo Streaming Studios, which it bills as the first-ever Spanish-language studio in Hispanic media exclusively dedicated to serving the growing Latino streaming audiences in the United States and around the world.

Following the creation of original titles “El Señor de los Cielos,” “La Reina del Sur,” “El Recluso,” “No Te Puedes Esconder,” “Jugar con Fuego” and, most recently, “Dime Quien Soy,” “100 Dias para Enamorarnos,” “Falsa Identidad” and “Mariposa de Barrio,” Telemundo is expanding production capabilities to create original scripted content exclusively for direct-to-consumer platforms. In addition to developing and producing its own IP, the new studio will offer production services to third-party direct-to-consumer platforms.

“Latinos are pacesetters of cultural and technological change,” Beau Ferrari, chairman, NBCUniversal Telemundo Enterprises, said in a statement.  “We are … super serving the Latinos of today with the best original, premium and culturally relevant content across all platforms.”

According to Nielsen, driven by streaming video consumption, Hispanics spend more time per day on video through TV-connected devices and video-focused app usage compared to “total adults.” Hispanics are often 50% or more of the average audience to shows that center on Hispanic characters and stories, which is a remarkable over index considering they are roughly 20% of the population.

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Based out of Miami, Telemundo Streaming Studios will be housed under Telemundo Global Studios, led by Marcos Santana, who will continue to oversee all original scripted productions for the network, including international co-productions. The new production unit launches with more than 35 projects in development and in production, including the dramedy “Armas de Mujer” for Peacock, “El Marginal” seasons four and five for Netflix, as well as the remake of “Historia de un Clan,” upcoming seasons of “El Recluso,” a new version of “El Diario de un Gigolo” and the action-packed series “El Immortal.”

“As pioneers in the production of scripted Spanish-language content for U.S. Hispanics, we have a wide range of experience to invest in producing the best scripted content for the growing number of Latinos who consume their favorite shows across streaming platforms,” Santana said in a statement. “With these new studios, Telemundo will be the go-to source for Latino streaming content in the US and around the world.”

HBO Max App Available on Cox Platforms

The HBO Max app is now available to Cox Contour customers on their set-top boxes, WarnerMedia and Cox Communications announced March 10.

Cox customers can now access HBO Max via their Contour 2 or Contour Stream Player devices by opening the HBO Max app using their Contour remote or by saying “HBO Max” into their voice remote to launch the app. Customers are also able to subscribe to HBO Max directly via their Contour TV device using their remote.

HBO Max, WarnerMedia’s direct-to-consumer platform, features content from HBO, Warner Bros., DC, Cartoon Network, Adult Swim, Turner Classic Movies and more, as well as all-new Max Originals at $14.99 per month. The streaming platform initially launched in the United States in May 2020 and will expand into 39 territories throughout Latin America in June, and the HBO-branded streaming services in Europe (the Nordics, Spain, Central Europe, the Baltics and Portugal) will be upgraded to HBO Max later this year.

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Fox News International Adds 12 More Countries

Fox News Media’s international streaming platform Fox News International Oct. 29 expanded its distribution to 12 additional countries, including Costa Rica, Ireland, Norway, Bulgaria, Cyprus, Czech Republic, Estonia, Latvia, Lithuania, Malta, Slovakia and Iceland.

The brings the total number of countries receiving the service to 27 in advance of the Nov. 3 U.S. presidential election. Subscribers have access to live feeds of Fox News Channel and Fox Business, plus a catalog of 20 on-demand programs.

Fox News International is available through mobile and OTT devices, including iPhone, Android, Apple TV and Android TV. It is also now offered with enhanced distribution across Amazon FireTV’s streaming platform.

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Fox News International Expands Streaming Platform in Europe

Fox News Media’s international streaming platform Fox News International expanded its distribution in Europe Oct. 15 to include Austria, Belgium, Denmark, Finland, Greece, Hungary, Luxembourg, Netherlands, Poland, Romania and Sweden.

That brings the total number of countries where the service is available to 15. The direct-to-consumer platform launched in Mexico in August, and in the United Kingdom, Germany and Spain in September. The platform is targeting a reach of more than 20 countries by early 2021.

Subscribers have access to Fox News Channel and Fox Business programming. Fox News International is available through mobile and OTT devices, including iPhone, Android, Apple TV and Android TV, with plans to bring the service to Amazon Fire TV and Roku later this year.

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Disney Reorganizes With Focus on Streaming Video

With much of its business units idled due to the coronavirus pandemic, Disney CEO Bob Chapek Oct. 12 announced internal restructuring that puts the focus on what is working: streaming video.

Kareem Daniel

Disney is combining ad sales with distribution into a new Media and Entertainment Distribution group led by Kareem Daniel, who has served as president of consumer products, games and publishing. The media giant said the move is to put a “focus on developing and producing original content for the company’s streaming services.”

The new group will be responsible for all monetization of content — both distribution and ad sales — and will oversee operations of the Company’s streaming services. It will also have sole P&L accountability for Disney’s media and entertainment businesses.

This means that while Alan Horn and Alan Bergman, Peter Rice, and James Pitaro will continue to lead Disney’s studios, general entertainment and amusement parks, respectively, they will do so separate from streaming video.

Rebecca Campbell

Rebecca Campbell, who headed direct-to-consumer operations, which includes Disney+, ESPN+, Hulu, and pending Disney+ Hotstar, was upped to chairman of international operations and direct-to-consumer. All five executives report directly to Chapek, with Campbell reporting directly to Daniel.

“Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value,” Chapek said.

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The CEO said separating content creation from distribution would allow Disney to be more effective in making the content consumers want most, delivered in the ways they prefer it, i.e. over-the-top video, transactional VOD and PVOD.

Indeed, Disney+ had more than 60 million subscribers in August. The bundle of Disney+ with Hulu and ESPN+ has 105 million.

“Our creative teams will concentrate on what they do best–making world-class, franchise-based content — while our newly centralized global distribution team will focus on delivering and monetizing that content in the most optimal way across all platforms, including the coming Star international streaming service,” Chapek said.

“It’s a tremendous privilege to work with the talented and dedicated teams that will comprise this group, and I look forward to a close collaboration with the outstanding and incredibly successful team of creative content leaders at the company, as together we build on the success we’ve already achieved in our DTC and legacy distribution business,” Daniel said in a statement.

A 14-year Disney veteran, Daniel has held leadership positions across a variety of businesses, including consumer products, games and interactive experiences, publishing, studio distribution, and Walt Disney Imagineering. Prior to that, Daniel was VP of Distribution Strategy at Walt Disney Studios, where he worked closely with the leadership in developing the company’s film content distribution strategy across multiple platforms and played a key role in the commercialization of the studio’s films.

“As we now look to rapidly grow our direct-to-consumer business, a key focus will be delivering and monetizing our great content in the most optimal way possible, and I can think of no one better suited to lead this effort than Kareem,” Chapek said. “His wealth of experience will enable him to effectively bring together the company’s distribution, advertising, marketing and sales functions, thereby creating a distribution powerhouse that will serve all of Disney’s media and entertainment businesses.”

Disney reports fourth-quarter (ended Sept. 30) fiscal earnings Nov. 5.

Disney+ Expands to Eight Additional European Markets; Releases ‘Mandalorian’ Season 2 Trailer

The Walt Disney Co. Sept. 15 announced that its branded SVOD platform, Disney+, is now available streaming in Portugal, Norway, Denmark, Sweden, Finland, Iceland, Belgium and Luxembourg. Featuring content from Disney, Pixar, Marvel, Star Wars and National Geographic, Disney+ launched Holland, United States and Canada on Nov. 12, 2019.

The platform launched in Austria, the United Kingdom, Spain, Italy, Germany, Ireland, and Switzerland on March 24, replacing DisneyLife in the U.K. and Ireland. Disney+ is expected to launch in Eastern Europe starting in October.

The news coincided with release the first trailer for the second season of the popular “Star Wars” spinoff series, “The Mandalorian.”

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“We have surpassed 60.5 million paid subscribers globally, and today we continue our international expansion with the launch of Disney+ in eight countries,” Rebecca Campbell, chairman of Walt Disney Direct-to-Consumer and International, said in a statement. “As a major force in the global direct-to-consumer space we’re bringing high-quality, optimistic storytelling that you expect from our brands to even more people.”

Analyst: Lackluster Weekend Box Office Could See Studios Further Delay New Releases

With Warner Bros.’ Tenet generating $30 million at the domestic box office over two weekends, and Disney’s Mulan almost surpassed by a local sci-fi film (The Eight Hundred) at the Chinese box office, the jury remains out on the state of the theatrical market’s return to normal from the coronavirus pandemic.

The third-quarter domestic box office is trending down 96.8% quarter-to-date to $101.1 million compared with the previous-year period, as theaters nationwide only recently began re-opening — and at reduced capacity. The latest box office weekend was 89% lower than the comparable weekend last year, according to industry figures.

The sluggish re-start, coupled with a majority of screens still dark in major markets New York and California, suggests studios will reconsider bowing major new releases in any great numbers in the near future, according to Michael Pachter, media analyst with Wedbush Securities in Los Angeles.

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Indeed, Warner just pushed back again the theatrical bow of Wonder Woman 1984 from Oct. 2 to Dec. 25 — more than a year after the sequel’s original launch date. Subsequent release dates included June4 and Aug. 14.

Sony Pictures Entertainment CEO Tony Vinciquerra last week told an investor event the studio would delay all major releases until 2021.

“What we won’t do is make the mistake of putting a very, very expensive $200 million movie out in the market unless we’re sure that theaters are open and operating at significant capacity,” Vinciquerra said.

Pachter says that trend will only grow as nervous studios contend with wary moviegoers and local government restrictions.

“We think the relatively lackluster second theatrical week for Tenet juxtaposed with the difficulty Disney has faced with Mulan has made film releases seem like a risky business in the current environment,” Pachter wrote in a Sept. 14 note.

The uncertainty is bound to increase pressure on studios to shorten the 90-day theatrical window and seek alternative distribution channels such premium and transactional VOD. The COVID-19 era has produced unusual circumstances (and opportunities) for studios, including dabbling in direct-to-consumer distribution.

The ongoing interest for at-home content could impact long-term decisions by studios regarding which content they send to theaters and which goes direct to streaming platforms, according to Pachter.

“This is particularly compelling for the studios that have launched or will soon launch their own subscription/ad-supported streaming video platforms,” he wrote.

 

Ampere Research: Pandemic Breaks Down Value of Theatrical Window

The pandemic has opened a door to breaking the theatrical window.

Research firm Ampere modeled various fictional scenarios of windowing during the pandemic, comparing the income post-COVID 19 to the income a title would have expected to have generated pre-2020.

“In a pre-COVID world, many of the scenarios would have offered only marginal gains (with significant risks) compared to a traditional release strategy,” according to Ampere. “However, in post-COVID markets, these options have started to look like viable opportunities.”

To assess the viability of a selection of alternative approaches, Ampere created a fictional mid-tier movie and modeled a series of windowing scenarios based on market trends, designing four scenarios of new windowing practices studios may adopt:

  • Scenario 1: Replace the first window theatrical distribution with premium video-on-demand (PVOD).
  • Scenario 2: Adopt strategies of using PVOD and theatrical windows sequentially, similar to Universal’s recent deal with AMC.
  • Scenario 3: Replace traditional windowing with a pure direct-to-consumer offering.
  • Scenario 4: Release films theatrically before making titles available exclusively on their own direct-to-consumer services.

The firm found the Universal deal with AMC (Scenario 2) was the most viable model for mid-tier releases. In Scenario 2, Ampere found that an accelerated PVOD window, such as the deal between Universal and AMC, is the most stable for exhibitors and studio groups, offering comparable returns for cinemas and increased revenue for the studio on mid- and lower-tier releases. However, top-tier titles are likely to be better monetized via traditional windowing models. The presence of theatrical releases still offers consumers the opportunity to view the movie with a cinema experience, meaning that this model doesn’t risk ‘lost’ transactions — unlike some of the other scenarios Ampere explored. The success of the model depends on negotiations with exhibitors and retailers, Ampere noted. Before agreeing to an earlier window, exhibitors will want to ensure that the mid-term future of the theatrical business is not being eroded to the extent that it will sideline them in future periods. Studios will need to work with digital retailers to ensure that films are adequately signposted as premium releases and are not unfavorably compared to catalogues of cheaper rentals, according to Ampere.

There is a significant appetite for home rental and purchase, with the domestic U.S. transactional video market at roughly 40% of theatrical’s size, according to Ampere. In principle, some titles could earn comparable amounts from PVOD as from theatrical distribution. However, for high-end blockbuster titles, which are typically able to obtain greater cuts of box office revenue, and international releases (in markets where the digital rental and retail market is less well developed), a pure PVOD approach would be far more risky. To account for this, split models would be more appropriate, with strategies tailored according to local importance of a title and the appetite for home rental and retail, according to Ampere.

Ampere’s research revealed that a theatrical to direct-to-consumer model is likely to be more feasible than a pure D2C model (bypassing theatrical entirely). However, both approaches are dependent on numerous influencing factors. Whether the model suits any given title is contingent on the retention of any new subscribers who signed up to watch the movie, and therefore the strategy is reliant on keeping both wider catalogue costs, and subscriber churn rates, down, according to Ampere.

“Looking forward, Ampere believes some of the major studios will adopt split strategies that can utilize PVOD while maintaining the benefits of theatrical distribution,” said Ampere analyst Peter Ingram in a statement. “Most of the studios have been experimenting with strategies during lockdown that completely eschew the theatrical window. However, despite the change we are expecting to the cinema market, theatrical remains one of the best revenue streams for titles throughout their life cycle. Not only do most people see the film in its theatrical window, but tickets are charged on an individual basis. By comparison, when a film is bought via PVOD, or watched via an SVOD service, it can be shared with friends and family under a single transaction.”

Disney SVOD Services Total 100 Million Paid Subs

Disney’s aggressive marketing of a branded direct-to-consumer (DTC) video package featuring Disney+, ESPN+ and Hulu has resulted to a subscriber base topping 100 million, CEO Bob Chapek Aug. 4 disclosed on the media giant’s third-quarter (ended June 27) earnings report.

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Disney ended the period with 57.5 million Disney+ subs, 8.5 million ESPN+ subs, 32.1 million Hulu subs and 3.4 million Hulu with Live TV subs. The data would suggest sub growth at Disney+ has cooled since attracting 54.5 million subs by May 4.

Disney attributed ESPN+ subscriber growth and higher income from Ultimate Fighting Championship pay-per-view events. The platform, together with Hulu and Disney+, has been bundled for $12.99 monthly and less.

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“[This is] a significant milestone and a reaffirmation of our DTC strategy, which we view as key to the future growth of our company,” Chapek said in a statement.

The milestone comes as DTC revenue topped $3.9 billion, up 2% from revenue of $3.8 billion in the previous-year period. Through nine months of the fiscal year, DTC revenue tops $12.1 billion compared with $5.9 billion in the prior-year period, and before the launch of Disney+ on Nov. 12, 2019.

While revenue increases in DTC, so do costs, at the expense of operating income. The segment reported a loss of $706 million, up 25% from an operating loss of $562 million in the previous-year period. Through nine months of the fiscal year, DTC operating losses have topped $2.2 billion, from $1 billion a year ago.

“Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses,” Chapek said.