The launch of Disney Plus has become the talk of the entertainment industry — for creatives, for tech mavens and for Wall Street — as production and development of original series and movies accelerate for the streaming service, slated to debut in the U.S. by year’s end.
Disney, under the leadership of chairman-CEO Iger, has re-engineered its operating segments and reshuffled its management ranks to prepare for its streaming future. The Burbank media giant has made big investments in technical infrastructure. And Iger rocked the Hollywood establishment in 2017 with his dogged pursuit of Rupert Murdoch’s 21st Century Fox entertainment empire. He was hunting for the kind of IP that can help drive Disney Plus and future platform offerings, and lend itself to exploitation through Disney’s well-oiled franchise machine.
Now that the Fox acquisition is near the finish line, with a projected close by March, industry sources say pressure is mounting inside Disney’s film and TV units to grapple with the force of a number of headwinds at once. They’re tasked with stepping up their overall output — significantly in the case of its movie units — at a time when they’re also bracing for what will surely be a massive process of integrating the contingent of Fox executives who will make the transition.
It’s become clear to Disney watchers that Iger — who says he plans to step down when his contract expires in 2021 — has staked part of his legacy on proving that the empire can strike back against Netflix and the upstarts that have so dramatically disrupted Hollywood’s old order. Insiders say the chief executive has been taking a strong hand in leading programming check-in meetings with the company’s various divisions.
Questions about how it will manage the transition from traditional distribution models into the walled garden of direct-to-consumer services are so numerous that Disney has scheduled an Investor Day presentation on the topic for April 11. The company is also hoping to dazzle with a demo of the service and a sneak peek at some of the programming in the works.
Wall Street sources say Disney will have to shed light on three key points in pitching the streaming strategy to investors: how much it will spend on content, how much traditional licensing revenue will be lost by keeping more of its content in-house, and when it expects the bottom of that investment cycle to come before a return to growth. That’s a tall order.
Disney is up to the huge challenges ahead, in the view of RBC Capital Markets senior media analyst Steven Cahall. He estimates the company will devote about $500 million to original programming for Disney Plus in 2019. “Disney spends more on content than anyone else globally. It has decades of experience in making excellent content, it has a huge balance sheet with low leverage and it’s a brand that’s known the world over,” Cahall wrote in December.
RBC research pegs Disney as the biggest spender among media giants on content, with a projected $23.8 billion for 2019, or $16.4 billion excluding sports-related properties. Disney’s total spending to fill its pipeline amounts to 22% of the estimated $107 billion in global content spending among the largest media companies. AT&T and Netflix are next on the list with $14.3 billion and $14 billion, respectively, per RBC.
Disney declined to comment for this story.