The show goes on
e:
Disney, in case you missed it, is pulling its titles from Netflix to launch its own streaming service. It makes sense, given the brand it can leverage. There’s also money in streaming, and the company figures it can make more of it from a Disney-branded streaming service than through licensing stuff to Netflix.
The house of mouse has a lot going for it: box-office dominance (it corners childhood as a market), an unrivalled intellectual property library and deep coffers. It’s a Us$160bn behemoth, with a multifaceted business model and no shortage of revenue streams: movies, television, theme parks, merchandising, licensing.
Some, however, aren’t buying it. BTIG media futurist and analyst Rich Greenfield says Disney is passing up $350m a year in “high margin” revenue for what he reckons is a risky, new and untested service.
More on this in a moment.
Another reservation is that Disney is late to the party: Hulu, HBO Go, Amazon Video, Facebook Watch . . . the market is pretty crowded. Still, Disney boss Bob Iger is confident that the gamble will pay off.
Just how much Disney will spend is unknown, but Wall Street predicts the venture will (initially) be an earnings drag.
Now, for Netflix (which, by the way, saw this Disney move coming), the effect should be minimal. Subscribers are unlikely to abandon it in What Netflix is paying Disney is only about 3% of its total projected content budget of $7bn in 2017. Out of interest, its long-term budget is $15.7bn.
Remember that in the past three years Netflix’s free cash flow has turned negative because of all the money it’s pumped into its own content and international expansion. My point is that Netflix probably won’t have a problem reallocating the Disney funds to fresh programming.
It’s already announced a deal with Grey’s Anatomy producer Shonda Rhimes to create shows exclusively for it. It’s being called television’s arms race for talent — she has ended her 15year partnership with Disney-owned ABC Studios. Also, Netflix announced an acquisition — the first in its 20-year history — buying Millarworld, the comic-book publisher behind Kingsman.
There’s big money in super-heroes. Whether none of us really wants to grow up or we’re just looking for “bigness and dumbness” as a panacea for all the world’s ills, there were more super-hero movies produced in the past decade than the previous three combined.
What this deal does is cover Netflix, if Disney pulls the plug on its Marvel arrangement with the company (very likely). Disney-owned Marvel makes shows exclusively for Netflix based on Marvel characters like Daredevil.
The issue for Netflix will be when (and if) rival media companies and other big Hollywood studios withhold or remove what they sell to it.