There aren’t many stocks that can announce a $4.7 billion quarterly loss, and end the day after the earnings announcement up almost 9%. But that is the magic of Disney.
Investors are clearly buoyed by the company’s new streaming service Disney+ that was launched just 5-months before the pandemic obliterated its lucrative parks and theatrical movie businesses. Disney+ has been so successful that it hit the benchmark it set for itself to achieve by 2024 – signing up 60-million subscribers – 4 years early.
Keeping kids home from school and away from crowded public spaces this year has provided an increased need to keep them entertained, resulting in a bright-spot for Disney in an otherwise disappointing quarter. It capitalized on the eyeballs hungry for content by releasing the cult Broadway hit ‘Hamilton’ exclusively on its new streaming platform over the July 4 weekend. While Disney+ doesn’t release viewership data — in keeping with the path laid by its contemporaries in the streaming space Netflix, Amazon Prime, AppleTV and Hulu (also owned by Disney) – CEO Bob Chapek declined to provide the number of viewers in the earning call, simply calling Hamilton “a huge success.”
The film was reportedly acquired by Disney for $75-million and was originally slated for release in theaters in 2021 after the end of its run as a play. COVID-19 changed all of that, canceling the Broadway run, and inspiring Disney to bring the streaming premiere of Hamilton forward to entertain families over the Independence Day holiday weekend. While the acquisition of Hamilton was a huge investment by Disney — some have suggested it is the highest film acquisition cost of all time — download data suggests it was worth it. Apptopia analyzes consumer’s interest in apps and says that the Disney+ app was downloaded 458,796 times in the U.S. the weekend of the Hamilton release, and 752,451 times globally. Those are massive increases on the number of times the app was downloaded prior to Hamilton being available on the platform.
Disney has now announced plans to duplicate its Hamilton playbook, and further tweak and monetize it. The long-awaited film ‘Mulan’ will be released on Disney+ on September 4. Unlike Hamilton, however, Disney+ subscribers who pay $6.99 per month to access the service, will have to pay an additional sum to watch the film. “The price point will be $29.99 in the U.S. and will vary slightly in other countries,” CEO Chapek said on the earnings call. “Simultaneously, we will be releasing the film theatrically in certain markets where currently we have no announced launch plans for Disney+ and where theaters are open.”
Global distribution is key to reaping maximum profit from a big-budget tentpole film, particularly in light of China having the most theater screens of any nation in the world. And Mulan was made to fit that model. The film is based on the legendary female Chinese warrior of the same name, with a budget said to be in the range of $200-million. Hopes for Mulan to dominate the global box office this year were strong because of its potential for huge international appeal.
Originally scheduled for release in March, Disney pulled the premiere just as U.S. theaters were shutting down due to COVID-19. Mulan was rescheduled for release twice this summer, but as the world continues to grapple with the novel coronavirus, opening in an optimal number of theaters was not possible. Instead, Disney has now decided to release the film on Disney+ in some territories in September. But rather than it being free, as was the case with Hamilton and the Star Wars based series The Mandalorian, consumers in the U.S., Canada, Australia, New Zealand, and some countries in Western Europe will pay to download Mulan.
Unlike Mandalorian — a series that was made for approximately $12.5 million per episode — the 2-hour Mulan movie was produced and budgeted with a lucrative theatrical release in mind. Disney now needs to recoup the enormous cost spent making it, meaning Disney+ consumers will have to pay as they would in a theater. Fortunately for the studio, the movie that stars an all-Asian cast can be shown in theaters in China as they are now open for business.
It is not just Mulan that is evident of Disney’s further push into digital. The company also announced this week that it will launch an ‘international, direct-to-consumer, general entertainment offering under the Star brand’ in 2021. Like Hulu, Star was acquired by Disney under a $71-billion deal with Fox last year. Disney is now leveraging the Star brand that is already strong in Asia, to develop a new streaming service that will provide content for consumers of all ages. “Mirroring the strategy we successfully pursued with Disney+, the offering will be rooted in content we own from the prolific and critically acclaimed production engines and libraries of ABC Studios, Fox Television, FX, Freeform, 20th Century Studios, and Searchlight,” Chapek said.
The success of Disney+ is charting a new direction for the studio, and the timing couldn’t be better as consumers of all ages are looking for entertainment while staying at home. Competition in the space is fierce and growing, with NBC releasing its Peacock streaming service recently, in addition to offerings from Sling, Philo, HBO Max, etc. Disney’s competitive advantage is that to access its content in the U.S. you must use its platform – most Disney content is not available on other streamers including Netflix and Amazon Prime. That makes it imperative for the studio to continue to make and acquire high-quality content to attract eyeballs to its own streaming platforms. With production shut-down domestically and in many international territories due to COVID-19, that is a cause of big concern.