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This Summer Will Be Pivotal for Disney’s Streaming Strategy | The Motley Fool

Last year, Walt Disney (NYSE:DIS) pushed back the release of Black Widow, the next film in the Marvel Cinematic Universe, from summer 2020 to May 2021 after COVID-19 ruined everyone’s plans. Now, it’s pushing back the opening a couple of months more, to July, and will release the film simultaneously in theaters and on its Premier Access service through Disney+.

The strategy of launching Black Widow (and Cruella in May) this way could be pivotal in determining the future of the premium video-on-demand format for Disney, and how it fits into its new distribution strategy.

Image source: Walt Disney.

How will Premier Access impact the box office?

Disney has released just two films via Premier Access: the live-action remake of Mulan and the animated original Raya and the Last Dragon. Management hasn’t shared specifics about either release. CEO Bob Chapek did say during Disney’s fourth-quarter earnings call that management was pleased with the results of Mulan. In the press release announcing the plans for Black Widow and Cruella, management said they’ll follow “the successful release of Raya and the Last Dragon.”

So far, the impact of day-and-date releases (the industry’s term for films that arrive simultaneously in theaters and on streaming services) hasn’t been very noticeable. Raya is performing about the same as other big-name titles like Tom & Jerry and Wonder Woman 1984 from AT&T‘s (NYSE:T) Warner Bros. The numbers are also similar to Comcast‘s Universal Pictures film The Croods: A New Age, which was released back in November.

Interestingly, all three studios have different strategies for home video releases. As mentioned, Disney released Raya through Premier Access. Disney+ subscribers who pay the $30 fee will be given access to stream the film as many times as they like. (It will join the service’s free-to-stream offerings on June 4.)

AT&T is releasing its entire slate of Warner Bros. films on HBO Max the same day they premiere at no additional cost. And Comcast kept a short exclusive theatrical window for The Croods before offering it as a rental via premium video on demand.

What that suggests is that movies aren’t drawing audiences to theaters right now. Instead, there’s a section of the population that wants to get out of their houses. Theaters are an option for some of them, and people who do go to theaters are choosing a film they find most appealing out of the limited selection.

Black Widow has the potential to be a film that consumers actively decide to go out and see in theaters. Big-budget Marvel films are best seen on the big screen with Surround Sound, and fans know that. That’s why Disney pushed the Black Widow release back to July, which will give people more time to get vaccinated and regain their comfort with the idea of sitting in a crowded theater. 

As a result, releasing the film on Premier Access could have a meaningful impact on the box office receipts. And one way or another, that’s going to dictate Disney’s strategy in the future.

An opportunity to sign up Disney+ stragglers

Disney already has over 100 million Disney+ subscribers, and about 40 million of them are in the U.S. Still, there’s lots of room to grow. Netflix, for example, has over 70 million subscribers in the U.S. and Canada, and over 200 million globally.

Offering big blockbuster films like Black Widow and Cruella exclusively for Disney+ subscribers (even if they have to pay extra) is a good way to get more people to sign up. AT&T notably saw an uptick in HBO Max subscribers and activations following the release of Wonder Woman 1984. Management expects to see similar engagement with several other Warner Bros. releases throughout 2021.

And if Disney can get someone interested enough to spend an additional $30 on Black Widow signed up with a Disney+ account, the trove of Marvel content on the service should get them to stick around. That could substantially boost the value of offering movies via Premier Access and more than make up for any box office revenue it might cost the company.

Disney has long benefited from theatrical windowing, as evidenced by its historical dominance at the box office combined with steady home entertainment sales. But as Disney shifts its focus to streaming, it’s possible that Premier Access will provide a better economic model for the media company than exclusive theatrical windows. How this summer’s big releases fare will play an important role in determining that.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


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