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The team behind the upcoming Disney+ streaming service will not focus on being “bigger than Netflix,” Kevin Mayer, chairman, direct-to-consumer and international at the Walt Disney Co., said at a media, entertainment and telecom industry event in Indonesia on Wednesday.
“Going all in with the new business model, disrupting the film business, is not taken lightly,” Mayer told the APOS Summit in Bali, Indonesia.
He acknowledged at APOS that Disney is forgoing the high-margin licensing revenue from its deal with Netflix to set up its own D2C service, but instead of going head to head, Disney+ aims to become a service that can co-exist in the marketplace with established players. “We’re not after being bigger than Netflix or beating Netflix,” Mayer said. “Netflix is a very high-quality service. We’re offering entirely different content. We’d just like to serve consumers well.”
He also said that the company will leverage the reach and appeal of its various business divisions to make a splash when the streaming service launches in November. Disney will utilize various segments, including its theme parks, consumer products business, TV networks, and film and other entertainment operations to promote Disney+, he explained. This will mean that the service’s subscriber acquisition will be “a little more efficient than others because of those platforms,” Mayer said. “We’ll utilize those fully and aggressively, for sure.”
Competitively priced at $6.99, Disney+ service will have a $1 billion programming budget in its first year and see Disney end partnerships with such established streamers as Netflix to retain content, including classic Disney and Pixar animated titles, the Marvel Cinematic Universe and Star Wars slates, and The Simpsons.
The company sees the two key benefits of launching its own direct-to-consumer, or D2C, service, Mayer said. The first is offering a more customized, personalized service to consumers. “You can understand your consumers. The only way to get data of people’s affinities and viewing patterns is to have a direct relationship with them,” he explained. “We can then use that data to personalize the service and serve the consumers better.”
The second is the ability to leverage the company’s brands for growth in the digital age. “It’s a big financial growth strategy,” Mayer said. “There’s a whole part of the value chain that doesn’t rely on third parties. And that distribution value chain doesn’t require massive infrastructure anymore. It requires the right brands, the right videos and the way to inject that video onto the internet. You can do that, you can have your high-quality distributor. We have the brands that work, brands that matter, therefore built-in equity with consumers, and an advantage to get people to view our product online outside of a traditional TV bundle.”
During an investor event earlier this month, Disney chairman and CEO Bob Iger forecast that Disney+ would break even in five years. Mayer detailed how the new setup of Disney’s business business will facilitate this. The theme parks and consumer products operations, which are related to intellectual property but are not media businesses per se, are grouped into one division, while the creative element, including the movie and TV studios and ESPN, are under another division, which, is “essentially a content engine,” Mayer said. Then there is the D2C and international division, which can monetize the content.
The D2C segment will pay license fees to use the product that the content segment creates, as it would pay other companies for programming, the executive mentioned. The five-year break-even plan includes these payments to the content divisions. “Investors will be able to value the traditional Disney, which we made whole because of the payments we’re making, and the new part of the Walt Disney Company, which is our D2C business,” he said.
A clearer picture of the original and other content that Disney+ will offer has continued to emerge since the unveiling of the pricing and other details.
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