Disney to Demonstrate DTC Service Disney+ April 11

The Walt Disney Co. will demonstrate its pending direct-to-consumer streaming service Disney+ and offer a first look at some of the original content being created by the company’s TV and film studios exclusively for the service at an investor day presentation April 11, the company announced.

Also, effective for the first quarter of fiscal 2019, the company will begin reporting segment operating results for four segments: media networks; studio entertainment; parks, experiences and consumer products; and direct-to-consumer and international (DTCI), the company reported Jan. 18 in a filing with the SEC. In the Form 8-K, the company also recast financial results for the past three fiscal years to reflect the reorganization of Disney’s business segments. In the fiscal year ended Sept. 29, 2018, recast numbers show the DTCI segment with a loss of $738 million.

“Our top priority is fully leveraging our global brands and great content to create world-class direct-to-consumer entertainment,” said Disney chairman and CEO Robert A. Iger in a statement. “We have the structure and management in place to drive growth in our DTC business, and our acquisition of 21st Century Fox further enhances our ability to deliver significant value to consumers and shareholders.”

“Acquiring BAMTech enabled us to enter the DTC space quickly and effectively, as demonstrated by the success of ESPN+,” Iger said in a statement. “The service surpassed 1 million subscribers in its first five months and continues to grow as it expands its content mix, all of which bodes well for our upcoming launch of Disney+. The ability to connect directly with millions of Disney, Pixar, Marvel, and Star Wars fans creates tremendous opportunities for growth. In addition to leveraging our existing IP in new ways, we’re making significant investments in original content exclusively for Disney+, creating an impressive pipeline of high-quality movies and series we believe will make the streaming service even more compelling for consumers.”

The slate of Disney+ content currently in production includes the first-ever live-action Star Wars series “The Mandalorian”; an original series based on Disney Channel’s “High School Musical”; an animated series based on Pixar’s “Monsters, Inc.” franchise; a new season of the “Star Wars” animated series “Clone Wars”; a live-action version of the animated classic Lady and the Tramp; and original docu-series. A live-action Marvel series starring Tom Hiddleston and a second “Star Wars” series starring Diego Luna are also in development, the company announced.

2018: Getting Along in a Multi-Platform World

Back in 1989, a State Department official named Francis Fukuyama wrote a controversial essay on the “end of history,” opining that the collapse of the Soviet Union and Eastern bloc communism, the reform movement in China, and the reunification of Germany signaled a triumph for Western democracy and a very real promise of freedom and liberty for all.

Fukuyama’s vision of a global utopia didn’t last long, but for a brief moment in time cultural and political differences seemed to be set aside in favor of everyone working together to make the world a better place.

Similarly, in 2018 the various factions in home entertainment seemed to set aside their differences and recognize that we’re living in a multi-platform world — and that a peaceful coexistence between disc and digital, subscription and transactional, was, indeed, possible.

“2018 saw the continued integration of technology and content at an even more accelerated pace, and, with that, the opportunity to engage fans with more focused and meaningful experiences that extend the life of our film and television properties,” said Keith Feldman, president of worldwide home entertainment for 20th Century Fox.

Indeed, studios cut back on selling content to Netflix — most notably Disney, which pulled all its movies off the service by the end of the year — in favor of issuing it on their own platforms. They rallied behind Movies Anywhere, a digital movie storage “locker” launched in October 2017, and saw digital movie sales soar, with an 18% gain reported in the third quarter of 2018, according to DEG: The Digital Entertainment Group numbers.

Netflix, meanwhile, vowed to spend $8 billion in 2018 on producing its own shows, with the goal of making its content library 50% original.

Studios that once sued Redbox for renting DVDs and Blu-ray Discs, claiming the kiosk vendor was cannibalizing disc sales, struck distribution deals in which prior holdbacks were either sharply cut back or eliminated. They also rallied behind Redbox On Demand, a digital movie store launched in December 2017.

On the retail front, big-box chains like Best Buy and Walmart put discs back into the spotlight, buoyed by the emergence of 4K Ultra HD Blu-ray.

And digital retailers like FandangoNow and Google Play revved up their promotional muscle and pumped up the message that they had fresh movies for sale or rent. FandangoNow even put up a notice on its home page, touting the fact that it offers “New releases not on Netflix, Hulu or Amazon Prime subscriptions.”

It was all part of a bigger picture, in a year dominated by major media mergers — AT&T buying Time Warner, Disney buying 20th Century Fox — suggesting it was high time to come together and restructure existing business models to reflect changing consumer habits.

Content, as always, was king, but the feuding fiefdoms of the past were at last coming to peace with each other — and with themselves.

Subscription streaming continued to dominate the home entertainment business in 2018. Indeed, in the first nine months of this year, according to DEG: The Digital Entertainment Group, consumer spending on Netflix and other subscription streaming services rose more than 30% to $9.4 billion, nearly $2 billion more than consumers spent on all other forms of home entertainment combined– disc purchases ($2.79 billion) and rentals ($1.37 billion); digital purchases, or electronic sellthrough (EST, $1.8 billion),  and digital rentals, or transactional video-on-demand (TVOD, $1.57 billion).

But where Hollywood once saw a threat, in 2018 the studios saw an opportunity. As consumers, thanks to streaming, became increasingly accustomed to viewing movies and other content electronically, studios focused on moving them toward on-demand digital purchases or rentals — driving home the message that new releases aren’t typically available through subscriptions.

“Our comprehensive and strategic efforts to drive digital ownership and bolster engagement such as leveraging the early window, offering exclusive extras and emphasizing the best viewing experience possible are proving to be very effective as consumers continue to move toward and embrace the digital experience,” said Chris Oldre, EVP of pay TV, digital and international distribution at Walt Disney Direct-to-Consumer and International.

“Movies Anywhere has had a tremendous impact on transforming digital consumption and is a testament to the strength of the studios and digital retailers that have joined forces on an unprecedented scale. This year Disney once again experienced remarkable growth as our digital sales exceeded expectations in conjunction with the studio’s unrivaled box office success. Disney has the top three bestselling digital titles to date with Avengers: Infinity War, Black Panther and Thor: Ragnarok. We’re also incredibly proud of our celebration of Marvel’s 10-year anniversary this year.  We promoted the Marvel Cinematic Universe home entertainment catalog with a special sales promotion across digital, which undoubtedly helped propel Avengers: Infinity War to the No. 1 live-action spot on the all-time digital sales chart in a record-setting period.”

Ron Schwartz, president of Lionsgate Worldwide Home Entertainment, said that as consumer habits evolve, digital movie sales and rentals – electronic sellthrough (EST) and transactional video-on-demand (TVOD) — remain a priority. “We saw a significant increase in industry spending in this area in 2018, up 20%, and we will continue to collaborate with our retail partners on fresh ideas to keep consumer interest alive,” he said. “We see a large and growing market with multi-platform and specialty releases and will continue to build our leadership in this area.”

At the same time, Schwartz notes, “Disc sales remain robust … 4K UHD BD is rapidly gaining in popularity, as spend is on track to double this year versus last. We are committed to serving our audiences across the full spectrum of the digital   and physical business and we will continue to be a first mover in adapting these businesses as they continue to evolve.”

For Bob Buchi, president of worldwide home media distribution at Paramount Pictures, 2018 was the year of 4K.

“More than 42 million homes now have a 4K Ultra HD television and roughly 400 titles are available on 4K Ultra HD Blu-ray Disc and over 600 on Digital 4K,” Buchi said. “The numbers keep growing and for good reason: 4K brings home entertainment to life like never before, delivering content that better represents filmmakers’ original vision.  We’ve seen this play out with the week one 4K sales of Mission: Impossible — Fallout, which delivered our highest number of UHD discs sold, as well as the highest percentage of our physical sales ever.”

Disney’s Oldre agrees. “4K Ultra HD is a robust line of business for us and we’re experiencing healthy growth,” he said. “We continue to receive solid support from our physical retail partners and are confident it’s a market that our customers will continue to embrace given the format’s premier resolution.”

Catalog sales were another bright spot in 2018, Buchi said. “We’ve seen our digital catalog sales growing in markets around the world, including a 35% increase domestically through October, which indicates that more and more consumers have become comfortable with the format and are returning to the concept of building collections.  In addition, physical catalog sales have exceeded our expectations, as we continue to make concerted efforts to celebrate anniversaries of classic titles and strategically promote films from our library.”

Retailers certainly did their part in pushing the transactional business. At Best Buy and Walmart, the emergence of 4K Ultra HD Blu-ray led to bigger disc sections and, in the case of Best Buy, placement back in the center of the store.

Redbox in 2018 relaunched its brand, which included some major ad campaigns and sponsorships, including the Redbox Bowl college football game on New Year’s Eve at Levi’s Stadium in Santa Clara, Calif. The company also revamped its loyalty program; negotiated more favorable distribution deals with studios; and expanded the availability of previously rented movies and video games at kiosks.

The Redbox On Demand digital service, meanwhile, celebrated its first birthday in December with a new app on Vizio SmartCast TVs. The company also expanded its selection to 12,000 titles, from 7,000 at launch. CEO Galen Smith in December told Media Play News that Redbox On Demand has “surpassed major milestones to become a real player in the competitive digital home entertainment space. We’re seeing hundreds of thousands of customers, including bringing back folks we haven’t seen in a while.”

FandangoNow, a business unit of movie-ticket seller Fandango, struck deals with most major studios that allow it to package movie rentals into “binge bundles” that let consumers watch multiple movies at a lower price. The new offering launched on the Labor Day weekend with more than 100 bundles.

FandangoNow also cross-promotes digital movie sales and rentals with ticket sales. In December, just before the holidays, consumers who spent $20 on FandangoNow received $8 toward a movie ticket.

In the end, studio executives agree, it all comes down to keeping consumers engaged — which requires constant work.

“From a functional solution like Movies Anywhere that allows consumers to build and enjoy a streamlined digital library, to premium viewing with 4K HDR, to story extensions through virtual reality and other emerging formats, keeping consumers invested and engaged requires constant experimentation and innovation,” says Fox’s Keith Feldman. “Our ongoing challenge is to exceed consumer expectations today and simultaneously deliver next-generation offerings that will continue that engagement in the future.”