3 Questions as Disney Readies Streaming Service Debut

Disney is set to report its fourth quarter earnings on Thursday afternoon, just five days ahead of its highly-anticipated launch of its Disney+ streaming service. Disney CEO Bob Iger will no doubt field questions from analysts regarding his expectations for the streaming service, which launches Nov. 12, during the company’s earnings call at 1:30 p.m. PT. But we have some questions of our own: 1. What is the plan for Hulu, especially Hulu Live? Disney+’s brand positioning is one of the key reasons cited as to why the streaming service will be a success. After all, who wouldn’t pay $7 a month for access to Marvel, Pixar and Star Wars (not to mention the Disney Vault)? But when it comes to Disney’s other streaming service, the picture is a bit more muddled. Hulu has been seen as the place where Disney will put much of its Fox titles that it deems too “adult” for Disney+, but is more known for the place to catch up on broadcast television. “With broadcast TV content increasingly less compelling as the most ambitious projects head to SVOD, combined with Comcast likely to shift NBC content to Peacock from Hulu and Fox only creating a minimal amount of entertainment programming going forward, Hulu needs to substantially scale up its original programming efforts,” Rich Greenfield, partner at LightShed, wrote in a research note. But can Disney afford to substantially increase its content investment in Hulu, while also making sure Disney+ is the robust offering it needs to be? It’s already pouring $1 billion into Disney+ next year, and will up that to more than $2 billion by 2024. Another issue facing Hulu is its Hulu Live business. Sony’s abrupt shut down of PlayStation Vue last week highlighted the challenges the virtual MVPD world is facing. Is another price hike coming? “With Disney’s intense focus on an on-demand streaming future with a compelling price/value relationship, losing money on Hulu Live appears to make less and less sense,” Greenfield continued. “Not only is Hulu Live losing hundreds of millions per year, but those losses are growing as programming costs continue to escalate annually with the CBS/Viacom merger likely set to force even more channels and cost into the Hulu Live bundle in 2020.” 2. Does Disney regret not linking up with Apple? Iger has been more than a little forthcoming about the possibility years ago that Disney would have been acquired by Apple during the Steve Jobs era, which he first detailed in his autobiography. During a recent BBC interview, Iger explained why that transaction would’ve made perfect sense, considering the industry’s current rush head first into streaming. “Given the strategic merit of a transaction in Iger’s view, we are curious why an Apple acquisition of Disney has not occurred, with Apple TV+ now competing for watch time (engagement) against Disney streaming services Hulu, Disney+ and even ESPN+,” wrote Greenfield. “We are also curious if Disney would be better equipped for a direct-to-consumer future under Apple than going it alone.” Apple already has the technology and the distribution mechanism via its massive customer base, but is a complete newbie in the content game. Disney has some experience with that, but is very new to building a tech product. Given that Iger has mentioned the obvious strategic value of a combination, we’re left to wonder why this didn’t actually happen. Will Disney also wonder what could’ve been? 3. Will Disney continue to shrink theatrical release windows? Disney announced that “Avengers: Endgame” will be available on Disney+ at launch next week, a month earlier than expected. That means that the highest-grossing movie of all time will be available for streaming less than 7 months after it hit theaters, which is shorter than usual. But with Disney siloing off its popular content for Disney+, the company has a unique advantage to cut down on those release windows. After all, why would Disney+ bother paying for DVDs or home video streaming of titles they know will be available on the service? Especially for films that under perform that box office — Greenfield points to “Maleficent: Mistress of Evil” and “Ad Astra” as two films they should get on the service quicker — it’s a way to beef up their content offering, without giving up box office dollars. “Disney, alone, has the power to shrink theatrical to home video windows, particularly for movies that do not perform at the box office,” wrote Greenfield. “Why not exercise your unique industry leverage to opportunistically shrink windows?”