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.

Lionsgate Eyeing Consumer-Direct Movie Option While Pledging Loyalty to Theatrical

With studios increasing distribution of select titles direct to consumers in the home while theaters remain largely shuttered worldwide, Lionsgate has dabbled in the PVOD window, releasing I Still Believe to consumers just weeks after its March 12 theatrical debut.

On a May 21 fiscal call, Joe Drake, chairman of the Lionsgate Motion Picture Group, was asked if the studio would consider distributing titles directly rather than through third-party platforms such as iTunes, Google Play, Vudu and Amazon, among others.

Drake, who said Lionsgate remains bullish on the theatrical business model, said the D2C concept, like a lot of the distribution status-quo during the COVID-19 pandemic, is being analyzed and tweaked, while remaining in solidarity with the theatrical window.

“One of the things [Lionsgate] prides itself on is being flexible and agile,” Drake said. “We still believe theatrical is a big driver of our business, and will continue to play aggressively in that space.”

Lionsgate’s first theatrical release is slated for Aug. 21 with horror film Antebellum.

At the same time, the executive said that when the studio sees an opportunity for distributing a movie direct to the consumer, it won’t hesitate. Drake didn’t directly answer whether that would include bypassing existing transactional VOD platforms in favor of Starz or another proprietary platform.

Lionsgate currently releases about 30 movies a year through digital channels, a strategy Drake said the studio would expand, but not at the expense of exhibition partners.

“I don’t think any company has done a better job exploiting niches and opportunities with audiences, and we’ll continue to do that,” he said.

Separately, Lionsgate said it is actively working with credit card companies such as American Express to include free Starz OTT service as part of a promotion. The studio/distributor currently has a Redbox promotion by which new Starz subscribers get nine free one-day kiosk disc rentals at a $5 monthly fee for 90 days.

“We think some of [those] consumer bases [with Redbox] overlap. We think there’s a great partnership there. We’ll continue to talk to almost anybody,” said Kevin Beggs, chairman of Lionsgate Television Group.

Lionsgate expects to generate upwards of 15 million combined Starz OTT, StarzPlay, Spanish-language Pantaya and StarzArabia subscribers by the end of the fiscal year. It ended the quarter with 10 million.

Discovery Hires Ex-Google Executive as CFO, Head of Strategy, Operations and Direct-to-Consumer

Discovery is ramping up over-the-top video distribution in the United States and internationally. The parent to HGTV, Discovery Channel, Food Network, TLC, Investigation Discovery, Travel Channel, Turbo/Velocity, Animal Planet, Science Channel, as well as OWN: Oprah Winfrey Network and Eurosport, March 10 announced the appointment of Neil Chugani as CFO and head of strategy and operations, Direct-to-Consumer.

The announcement was made by Gunnar Wiedenfels, CFO, Discovery, to whom Chugani reports. In the newly created role, Chugani will work closely with Peter Faricy, CEO, global direct-to-consumer at Discovery, and his team to drive the financial strategy of Discovery’s rapidly expanding DTC team. He will be based at Discovery’s London offices.

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Neil Chugani

“Neil is a highly respected digital finance leader, whose experience and skills will help us further accelerate our strategic pivot as we make our great content and brands available to our passionate fans across all platforms around the world,” Wiedenfels said in a statement.

Chugani will be responsible for formulating and implementing the financial strategy to help Discovery’s ambitious growth objectives in the DTC space. He will work with all of Discovery’s DTC business units, both in the U.S. and International markets to create consistent strategic, financial, and operational practices.

Prior to joining Discovery, Chugani was at Google since 2015, where he was a senior director and held a number of leadership positions. Most recently, he served as CFO for the business and operations of Google and YouTube in Europe, Middle East and Africa.

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Disney Doubles Direct-to-Consumer Segment Loss to $740 Million

Acquiring control of Hulu and launching a branded subscription streaming video service is expensive.

Disney Nov. 7 reported it lost $740 million in its nascent direct-to-consumer (DTC) business unit in the fourth quarter (ended Sept. 30) — more than double the $340 million operating loss in the previous-year period.

DTC oversees Disney’s foray into over-the-top video distribution, which includes the acquisition of backend support technology provider BAMTech.

The segment generated revenue of $3.4 billion compared to revenue of $825 million last year. For the fiscal year, DTC revenue topped $9.3 billion compared to revenue of $3.4 billion in the previous period.

Operating loss skyrocketed to $1.8 billion in the fiscal year compared to an operating loss of $738 million last year.

The increase was due to the consolidation of Hulu (from Comcast), costs associated with the upcoming launch of Disney+ and ongoing investment in ESPN+, which was launched in April 2018 and has more than 3.5 million paid subscribers. The losses were partially offset by a benefit from the inclusion of the 20th Century Fox businesses driven by income at Star India.

Disney+, which launches on Nov. 12, is not expected to turn a profit until 2024.

CFO Christine McCarthy said Disney’s direct-to-consumer segment is projected to lose upwards of $850 million in the current first quarter through ongoing investments in Disney+ and consolidation of Hulu — the latter ending the fiscal year with 28.5 million subscribers.

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Separately, Disney said studio revenue increased 52% to $3.3 billion and segment operating income increased 79% to $1.07 billion.

Higher operating income was due to an increase in theatrical distribution results, partially offset by a loss from the consolidation of the Fox businesses. The increase in theatrical distribution results was due to the performance of The Lion King, Toy Story 4 and Aladdin in the current quarter compared to Incredibles 2 and Ant-Man And The Wasp in the prior-year quarter.

Operating results at the Fox businesses reflected a loss from theatrical distribution driven by the performance of Ad Astra, Art of Racing In The Rain and Dark Phoenix, partially offset by income from TV/SVOD distribution.

“We’ve spent the last few years completely transforming The Walt Disney Company to focus the resources and immense creativity across the entire company on delivering an extraordinary direct-to-consumer experience,” CEO Bob Iger said in a statement. “We’re excited for the launch of Disney+.”

Survey: More Than 14% of U.S. Netflix Subscribers May Cancel It in Favor of Disney+

More than 14% of U.S. Netflix customers are considering ditching their subscription in favor of Disney+ when the new streaming service launches in November, which could amount to a loss of approximately 8.7 million subscribers for the streaming pioneer.

Those are the findings of a survey of more than 600 U.S. Netflix subscribers commissioned by Streaming Observer.

In the survey, 12.7% said they “might cancel Netflix” while 2.2% said they would “definitely cancel Netflix” and get Disney+.

Survey respondents with kids in their household were more than two times as likely to say they plan to cancel Netflix for Disney+.

Roughly two in five Netflix subscribers in the survey said they will try Disney+, which costs $6.99 per month ($69.99 per year), when it debuts. One-fifth of those surveyed said they plan on subscribing to both services, and 40% said they have no interest in Disney+.

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Viacom Completes Pluto TV Acquisition

Viacom March 4 announced the completion of the acquisition of AVOD service Pluto TV.

The acquisition, for $340 million in cash, will advance Viacom’s strategic priorities while solidifying Pluto TV’s leadership in the domestic free streaming video market and accelerating its growth globally, according to a Viacom press release.

Pluto TV will operate as an independent subsidiary of Viacom, led by President and CEO Tom Ryan.

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“The completion of this deal marks an exciting next step in Viacom’s evolution and a powerful opportunity for us to extend our consumer reach and broaden our ability to add value across the industry as the media landscape continues to segment,” said Bob Bakish, Viacom president and CEO, in a statement. “Together with Pluto TV, we look forward to becoming a stronger partner to distributors, advertisers, content providers and audiences around the world.”

Founded in 2013, Pluto TV streams more than 100 channels and thousands of hours of on-demand content spanning television and movies, sports, news, lifestyle, comedy, cartoons, gaming and trending digital series. It has more than 12 million monthly active users across devices, including smart TVs, streaming players, mobile devices, desktops and gaming consoles, according to the release.

“Pluto TV will have a crucial role in expanding Viacom’s presence across next-generation distribution platforms as a standalone free over-the-top (“OTT”) product, a direct-to-consumer cornerstone, and a partnership solution for wired, mobile and OTT distributors to serve their broadband only and video bundle subscribers on a zero incremental cost basis,” stated the release.

Pluto TV also benefits Viacom’s advanced marketing solutions (“AMS”) business, serving as a source of targeted inventory — particularly for younger demographics — thereby strengthening Viacom’s ability to serve advertising customers and their associated agencies, the release stated.

Disney’s Direct-to-Consumer Biz Widens Q1 Operating Loss

Disney CEO Bob Iger says over-the-top video is the media giant’s future and No. 1 goal in 2019.

That future is expensive, too.

Disney Feb. 5 reported that first-quarter (ended Dec. 29, 2018) operating losses from the direct-to-consumer & international segment increased from $42 million in the previous-year period to $136 million. Revenue decreased 1% to $918 million from $931 million. The dip reflected a 4% decrease from an unfavorable foreign currency impact.

The increase in operating loss was due to the ongoing investment ramp-up in ESPN+, which launched last April and has about 2 million subscribers, a loss from streaming technology services and costs associated with the upcoming Q4 launch of Disney+, partially offset by an increase at the company’s international channels and a lower equity loss from its investment in Hulu.

Increased revenue at international channels was due to lower costs, affiliate revenue growth and higher program sales, partially offset by an unfavorable foreign currency impact.

Results for Hulu, which is co-owned by Disney, Fox, Comcast and WarnerMedia, reflected increases in subscription and advertising revenue, partially offset by higher programming costs. The service has more than 25 million subscribers.

“We look forward to the transformative year ahead, including the successful completion of our 21st Century Fox acquisition and the launch of our Disney+ streaming service,” Iger said in a statement. “Building a robust direct-to-consumer business is our top priority, and we continue to invest in exceptional content and innovative technology to drive our success in this space.”