The honeymoon is over for Disney+. Since launching right before the pandemic, the streaming service has been a resounding success. It quickly reached over 100 million subscribers and leaping Netflix in total subscriber count felt imminent to most investors and media onlookers.
Until it wasn’t. This past quarter, Disney reported a meager two million new subscribers — well underneath expectations. All of a sudden, the new narrative is Disney+ will struggle to grow. That is, unless they make one of the following moves:
Decouple From ESPN
Sports entities — between leagues, teams, and media companies — are all tying its future growth to betting on NBA games, NFL, MLB, and other sports. Welp, everyone except the Disney-owned ESPN. You see, gambling doesn’t exactly fit Disney’s family-friendly image, which leaves money on the table for ESPN.
The ESPN business, as a whole, isn’t aligned with Disney’s “all-in” approach to streaming. ESPN is locked into contracts with the top leagues for years in advance, none of which includes content for the ESPN+ streaming service — only the regular TV channel. As people continue to cut the cord, ESPN’s biggest revenue source will continue to dwindle.
Therefore, a split for Disney and ESPN could benefit both sides. Disney would be free of the money-hemorrhaging ESPN, therefore, it’s stock could be valued more as a tech enterprise than “traditional” media company. For ESPN, it could rid itself of Disney’s family-friendly approach and cash in on the ongoing sports betting boom.
As for how this could help Disney+, it goes back to the stock price. Without ESPN and likely higher share price, Disney could raise money through the public markets more effectively. Money that can be used to greenlight more big-budget content for the streaming service. As they say, “content is king” anyway.
Double own On Hulu
Disney+ built its subscribers base on the back of its second-to-none IP — Marvel, Star Wars, Toy Story, etc. At this point, the diehard fan bases of those franchises are already Disney+ paying customers. Any future growth will have to largely come from “regular” content consumers, the ones Netflix dominates with thanks to its something-for-everyone content strategy.
Once again, Disney’s family-first strategy is a hindrance. Take Netflix’s Squid Game, which set streaming records across the world. Of course, that show would never be available on Disney+ or any other with any speck of blood. That alone is going to deter everyday viewers that don’t have families.
A possible solution? Leverage Hulu. Perhaps via a streaming service merger with Disney+ or just building it out separately. Hulu, of course, has a larger adult-themed content library than Disney+ and does have brand equity as one of the first streaming platforms.
There’s only one problem: Disney owns only a 67% stake in Hulu. The remaining 33% is owned by Comcast and “The Mouse” can’t buy that stake until 2024. That creates a pickle for Disney. If they grow the value of Hulu now, they would just end up costing themselves a larger bill come 2024.
And there lies the Hulu dilemma: neither of its two owners is focused on it since Comcast is all-in on Peacock themselves. 2024 is two years away still and at this rate, the service needs energy and focus to keep up with the Amazon Primes of the world.
Movie Theater Releases On Disney+
What Disney decides to do with its blockbuster moves remains the “joker” in its stack of cards — and no one knows what’s up their sleeve. Earlier this year, they seemed bullish on offering same-day movie releases between traditional theaters and Disney+ but they’ve relented in recent months.
But if Disney is seriously all-in on Disney+, which appears to be the case, sacrificing box-office dollars might be a necessary sacrifice. HBO took the risk this year and it’s somewhat paid off. Of course, Disney’s movie offering of Marvel Cinematic Universe and Star Wars blows anything HBO could offer (King Kong vs. Disney, for example).
If we were Disney CEO Bob Chapek, we would deal theaters its last blow with Disney+ launches. If not, Netflix might deal the knockout punch to Disney+ for good. You decide which outcome you want, Bob.