Subscriptions are far outpacing expectations, covering for early slip-ups
Disney+ celebrates its first birthday later this week, capping a launch that has gone better than even Bob Iger could have dreamed of in his most optimistic moments.
While the COVID-19 pandemic has battered Disney all year by shutting down its theme parks and keeping movie theaters closed, Disney+ has been a lone bright spot. The streaming service has already established itself as a formidable challenger to Netflix's throne. At the same time, the pandemic has supercharged the industry-wide shift toward streaming. The U.S. now has around seven top-tier streaming services, with ViacomCBS' upcoming rebrand of CBS All Access into Paramount+ set for early next year.
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Despite some stumbles, Disney+ has emerged as a dominant competitor in the space -- one that might be capable of challenging category leader Netflix.
First, let's look at what worked:
1. Subscriber Boom Out of the Gate
Disney already had lofty goals for how well Disney+ would start out of the gate, and the streaming service surpassed them anyway.
Within its first three months, it shot past 28 million subscribers -- many analysts had projected it would take Disney+ until the end of 2020 to reach 20 million. By August, the service had already gone past 60 million, a number Disney executives didn't expect until 2024.
The service got a boost from a few original hits including "The Mandalorian," but the initial success was mostly due to the strength of its library of classic Disney programming, particularly among families. Much of Disney's streaming bet was on the basis that access to Marvel, Pixar, "Star Wars" and its own vaunted Disney Vault would be enticing enough by itself to attract subscribers.
Though it still trails Netflix, which has almost 200 million subscribers around the world, Disney+ convincingly placed its flag in the streaming wars as the biggest threat to Netflix's dominance.
It couldn't have come at a better time for Disney, either. Thanks to the pandemic, its movies and two money-making businesses theme parks have been hammered with record revenue drops. While Disney+ is still a loss on the balance sheet, mew Disney CEO Bob Chapek reorganized the business to make streaming might turn a profit quicker.
2. Baby Yoda Channeled the Pop Culture Force
With so many newcomers in the streaming market, it's never been more important to have a big, tentpole hit. Disney+ had that right out of the gate with "The Mandalorian," a new series set in the "Star Wars" universe which catapulted into the pop culture zeitgeist thanks to Baby Yoda. The character's popularity -- which led to a scramble to create toys and other merchandise to meet demand -- even shocked LucasFilm CEO Kathleen Kennedy, who told TheWrap back in August, "I don't think anybody anticipated the degree to which he would catch on."
It's also leading to subscribers: According to Antenna, the second season of "The Mandalorian," which debuted Oct. 30, signups are up more than three times the October average, and brought back people who had dropped their subscriptions between seasons. (Disney has remained mostly mum about actual viewership information.)
The first-ever "Star Wars" live-action TV show immediately announced the streaming service's arrival with a bang. Other streaming newcomers (looking at you Quibi) landed with a whimper -- and without a signature hit to lure in new subscribers.
The series was not only lauded by fans but also by the TV Academy as well, giving it a Best Drama nomination at this year's Emmys.
With the future of "Star Wars" on the big screen cloudy, Disney+ has quickly become the main home for a galaxy far, far away. Along with "Mandalorian," the streaming service has Ewan McGregor returning as Obi-Wan Kenobi for his own series and a "Rogue One" prequel upcoming as well.
"The Mandalorian's" success has also covered up the fact that the rest of Disney+'s original content efforts have been a mixed bag (more on that below).
3. Storming the International Shores
Disney+ would not have gotten off to its fast start without help from overseas. Though Disney executives have not given a breakdown between domestic and international subscribers, they have credited the international rollout for much of this year's subscriber gains.
In its first year, Disney+ has launched in Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Mauritius, Monaco, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. It hits Latin America on Nov. 17. When Disney+ integrated within India's Hotstar (which was acquired by Disney in its Fox deal), it immediately added 8 million subscribers.
Disney beat all of its new competitors to the international market. Only Netflix and Amazon boast strong overseas footprints, and they had years ahead of Disney to build their customer base.
Not everything has gone to plan. Here are some areas where Disney+ could use a boost:
1. Original Content Pipeline Sputters
Disney+ started out of the gate with "The Mandalorian," a "High School Musical" TV series and a live-action "Lady and the Tramp" movie (not to mention a Jeff Goldblum-hosted Nat Geo series). But it hasn't been all smooth sailing for Disney+'s original content efforts since.
From production issues on a "Lizzie McGuire" revival and the aforementioned Obi-Wan Kenobi series, to shuffling "High Fidelity" and "Love, Victor" off to Hulu, the streaming service's original content pipeline has been a bit clogged. Some of that was inevitably due to the pandemic, which forced virtually every TV and film production to shut down for many months.
For example, "Falcon and The Winter Soldier" was supposed to be Disney+'s first Marvel Studios show in August. Because of production shutdowns, it will now premiere sometime next year. Another Marvel series, "WandaVision," however, is on track to debut in December.
Disney has buttressed the slow rollout by rerouting content toward the streaming service from other places. With the lack of open theaters because of the pandemic, films including "Hamilton," "The One and Only Ivan," "Artemis Fowl," "Mulan" and Pixar's upcoming "Soul" were all moved over to Disney+. So was the miniseries "The Right Stuff," which had been in development for Nat Geo.
2. Executive Suite Resembles a Game of Musical Chairs
It has not been an easy go for Disney+ in the executive suite.
Kevin Mayer, whom many saw as a front runner to succeed Bob Iger as Disney CEO following the successful streaming launch, instead left in May after Bob Chapek got the top job. He wasn't the only notable departure, as Agnes Chu, who headed up the original content efforts with Ricky Strauss, left this summer for Conde Nast.
Since the start, Disney+'s executive structure has put no one person in charge of original content. Chu and Strauss lead the division, but all development was in the hands of the company's film and TV studios. Neither Mayer nor current streaming boss Rebecca Campbell has any background in content development.
Last month, Disney reorganized its corporate structure, placing Disney+ content development in the same bucket as its films and TV studios. But it still leaves open the question as to who makes the final call on whether a film or TV show gets distributed on a legacy platform like ABC or movie theaters or Disney+ (or even Hulu).
Alan Horn, Alan Bergman, Peter Rice and Jimmy Pitaro are still in charge of their respective content groups (film, TV, sports), but the new Media and Entertainment Distribution group is technically in charge of where the content goes. It's hard to believe Horn or Bergman will not have a say in where the next Marvel or Pixar film goes.
3. "Mulan" Experiment Was No Game Changer
Bob Chapek called Disney's decision to pull the thrice-delayed "Mulan" from movie theaters and make it available for purchase on Disney+ a "one-off." It will probably remain that way.
The studio took a bet on the $200 million live-action remake of the animated hit -- a tentpole whose cost (and profit potential in theaters) made it difficult to follow the path of cheaper fare like "Hamilton." So the company tried an approach that mimicked releasing the film as premium on demand -- but entirely within the Disney universe so that no revenues were shared with VOD platforms.
Although "Mulan" briefly made Nielsen's Top 10 streaming list, the decision to offer "premiere access" to subscribers who wanted to pay an extra $29.99 was undercut by the knowledge that it would only be a premium offering for three months. Next month, "Mulan" becomes available for all subscribers without the extra charge.
Disney still released the film in theaters overseas that were open, but this rollout was likely just a way for Disney to recoup some of the money after waiting since March, when it was initially scheduled to be released (the film's World Premiere on March 10 was the last major Hollywood gathering before the pandemic shut everything down).
If you want further proof that Disney wasn't exactly blown away by "Mulan's" performance: Pixar's "Soul," which, like "Mulan," is being pulled from theaters for Disney+, will cost subscribers no extra charge when it debuts on Christmas Day.