M&E Connections

Analyst: Disney’s Plans for Marvel, ‘Star Wars’ a ‘Big Deal’ But ‘Not a Big Shock’

The disclosure by Disney CEO Robert Iger that his company will be including its Marvel and “Star Wars” movies on its coming direct-to-consumer streaming service was significant, but hardly came as surprise, according to Wedbush Securities analyst Michael Pachter.

“It’s a big deal” that the new service will include Marvel and “Star Wars” movies, Pachter told the Media & Entertainment Services Alliance by email Sept. 8. But Disney was “coy” when it said on its earnings call in August that the service would include Disney content, and “this was widely anticipated,” he said, adding: “I think that most people always assumed ALL Disney new release window content would be pulled” from Netflix, so “this was not a big shock.”

In response to Iger’s comments, Netflix issued a statement saying that, as with Disney films, U.S. Netflix members “will have access to Marvel and Star Wars films on the service through the end of 2019 and 2020 in many cases.” It added: “This includes all new films shown theatrically through the end of 2018. We continue to do business with the Walt Disney Company on many fronts, including our ongoing relationship with Marvel TV.”

In launching the Disney-branded service, Disney will end its distribution deal with Netflix for the subscription streaming of new Disney and Pixar releases starting with the studio’s slate of titles that will be released theatrically in 2019, including “Toy Story 4,” a live action version of “The Lion King” and its “Frozen” sequel, Iger told analysts in August. But, at the time, he said the “disposition” of Disney’s Marvel and “Star Wars” films were “not determined yet.” He told analysts at the time that there was “a discussion internally about how best to bring them to the consumer.”

While it was “possible we’ll continue to license them” to Netflix, it was “premature to say exactly what we will do,” he said. One possibility includes separate proprietary Marvel and “Star Wars” services, but he said, “we’re mindful of the volume of product that would go into those services, and we want to be careful about that.”

Iger, however, went on to tell attendees at the Bank of America Merrill Lynch Media, Communications & Entertainment Conference in Los Angeles Sept. 7: “We’ve now decided that we will put the Marvel and ‘Star Wars’ movies on this app as well.” The platform will, therefore, “have the entire output of the studio,” including all Disney animation and live action movies, he told the conference. In addition to that, Disney has also spent a lot of time developing original movie content for the app, and the studio is already “developing and will produce four to five original films exclusively for the app, primarily live action,” he said. Also, the app will include 400 to 500 Disney films from the studio’s library, he said.

On the TV side, Disney will “create four to five original Disney-branded television series for the app, and we’re going to produce probably three to four television movies that are Disney-branded,” he also disclosed. About 7,000 episodes of Disney-branded TV content will also be included on the app, including recent seasons of all Disney Channel programming, but not from the current season when it launches, he said. There will also be “thousands of shorts” that Disney produces on the app, he said.

We should “think of the Disney app as more of a traditional” streaming video on demand service that will come with a monthly fee, he went on to say, but didn’t disclose what that price will be. “I know that there’s been a lot of curiosity about what we will charge and how much we will invest in everything that I just described, and we intend to get more specific about that in the months ahead,” he said.

Although the app is largely planned as a domestic service, he said Disney will “launch it internationally as well, and it’s possible that some markets will launch the service earlier than we’ll launch” in the U.S. due to “windowing opportunities that we have on the motion picture side that we don’t have here” in the U.S. The Disney Channel will continue to exist and the company is “not taking products off” it in the U.S, he said.

Through the one Disney-branded app, viewers will be able to watch Disney Channel shows with authentication, and will be able to also subscribe to the Disney service including all the Disney movies, he said. If somebody doesn’t want to subscribe to the service but has a multi-channel service, that person can authenticate on the app to watch the Disney Channel and some other free content that will exist there, he told the conference. But he said: “If you want Disney plus everything I just described, you can subscribe to that on top of your multi-channel subscription.”

Because there will be just one app for Disney-branded content, just one download will be required, making it “very simple for the consumer,” he said, adding that if somebody is not a subscriber of a multi-channel service, that person can subscribe to the Disney app alone, but won’t see the channel programming. Disney has “already heard from a number of distributors who would like to distribute the app,” he added.

The Disney-branded app won’t launch until late 2019 for two reasons, he told the conference. First, because “as we exit the Netflix output deal, we don’t get access to our theatrical release movies until the beginning of 2019,” he said. The company also “wanted time to actually develop and build up original programming for the platform,” he said.

The Disney-branded app is in addition to an expanded ESPN-branded direct-to-consumer app launching this spring. Both services are using the streaming technology of BAMTech. Disney acquired a major stake in that company last year and invested an additional $1.6 billion to increase its stake from 33% to 65% and acquire control of the company, Iger disclosed in August. The expanded ESPN app will launch with 10,000 live sporting events that are not currently on ESPN’s linear channels, he said Sept. 7.