Disney+ launches in November. Here are four reasons why you’ll be a subscriber.

• A New Platform to Expand Upon Iconic Stories. Disney+ shows will dive deeper into the characters and moments in between blockbuster events, filling in the gaps that movies can’t. Fans will almost have no choice but to stay up to date with the new content, as it will likely impact their favorite film franchises and spawn brand new ones.
• The Power of Nostalgia and Unparalleled IP. Disney has a flywheel of compelling content leveraging its deep library (Marvel, Star Wars, Pixar, new Fox assets, etc.) and theatrical distribution.
• Pricing. $7 per month for Disney+ is a great value, especially when compared to Netflix’s most popular $13 plan. Disney doesn’t need to bid for IP like Netflix does since it owns all the IP already. In-house productions will help keep costs down and pricing lower than competitors for now.
• Sports and Live TV. Eventually adding a discounted sports and live TV bundle will ensure remaining cord-cutters transition to Disney’s ecosystem.

A New Platform to Expand Upon Iconic Stories

The most compelling reason to subscribe will be the quality and existing demand of the content. The whole world is waiting in anticipation of Avengers: Endgame, the finale of more than a decade of blockbuster superhero films. Films are limiting in the nature of their form factor given filmmakers only have 90-120 minutes to tell a story that warrants a $12 trip to the theater.

Fans always want more time to connect with their favorite characters and immerse themselves in extraordinary worlds. Disney now has a platform to give fans more. The flywheel is simple: Disney will develop side characters through TV shows and will turn them into new fan favorites, some of which will eventually warrant new films.

• 

Beyond films, which Pixar, Marvel, and Star Wars are best known for, writers and directors will have a new medium to tell their stories in episodic form. We are already seeing Pixar dip its toe into episodic content with a new show in the Monsters Inc. universe called Monsters At Work which is a workplace comedy that has similarities to hit shows like The Office. This is just one example of new shows that fans of the biggest franchises in the world will be dying to watch.

The power of Disney+ will take franchises like Marvel beyond the silver screen, lifting the business to the next level. Kevin Feige, President of Marvel Studios, can now continuously release content and not risk film fatigue while having films drive people to the TV service and TV shows driving people back to the theaters.

The Power of Nostalgia and Familiar IP

Another advantage Disney+ will have over competitors like Netflix, Amazon Prime and Apple TV+ is the power of nostalgia and familiar IP. It can be hard for people to take the plunge into a new show if they don’t know much about it already. After a few minutes of indecision, many of us retreat to repeat viewings of our favorite shows. Sequels and spin-offs are much easier sells. It’s no coincidence 9 of the 10 highest grossing films of 2018 were based on existing IP or a sequel.

• 

With pre-existing demand for new content related to familiar IP, the streaming service will be able to hit the ground running. Disney’s announced slate of projects coming to the streaming service in November already has clear future hits.

Some analysts seem to think the appeal of Disney+ is on-demand access to the vault of Disney animated classics. While this could be the case right out of the gate, we don’t believe this will be the driver of most subscribers in the long term. The pipeline of new content will keep us paying $7 per month after we’ve watched Lion King for the third time. In other words, It’s not about watching Ironman 2 again, it’s about new stories to related to Ironman and his villains.

Pricing

At $7 per month or $69.99 per year ($5.83 a month), Disney+ could quickly become the best value streaming service on the market, especially when compared to Netflix’s most popular $13 plan. We don’t expect the price to stay this low forever, as we’ve seen Netflix successfully raise its own prices without material backlash.

One big advantage Disney has over its streaming competitors is they don’t need to compete for IP. Netflix hasn’t yet been able to acquire the likes of Marvel, Star Wars, Pixar and 21st Century Fox, so they have to bid on rights to new shows against big pocketed competitors (Amazon, Apple, Facebook, Google, HBO, Showtime, Hulu, etc). Since Disney practically has a monopoly on culturally relevant IP, they don’t have to enter bidding wars for content that has driven Netflix’s content budget up to $15B+. For example, Netflix had to spend almost $100M to keep Friends on the platform in 2019.

Disney’s in-house productions will help keep costs down and pricing lower than competitors for now.

Sports and Live TV

One of the key reasons consumers cite for not cutting the cord is live sports and TV programming. Disney’s media networks, most notably ESPN and ABC, represent >40% of the company’s revenue and with cord cutting taking a major toll on Disney’s stock over the last few years, there is little doubt Disney will be doing all that they can to defend their most lucrative business segment against this trend.

The beauty of cord cutting is consumers don’t have to pay a premium for hundreds of channels they will never watch. In the next generation content consumption market, consumers will be able to pay for only the “channels” they want. This is bad news for many cable TV channels that survive on the back of ESPN and other popular channels keeping cable alive, but not Disney.

Disney is in a great position to create its own TV bundle with the few channels people actually want: sports, live events, news, etc. Best of all, Disney will likely sell this bundle of sports content, live TV, and Disney+/Hulu for a nice discount that will be hard to compete with.

This is a unique offering because Netflix has said they will likely not get into sports or serious live TV anytime soon. Others have tried but don’t appear to have had major successes with it, given the fragmented nature of the offerings. After the Fox acquisition, Disney also now owns a majority stake in Hulu which has recently been focusing on the launch of its Live TV offering for $45 per month.

While there is plenty of room for multiple winners in the streaming game, Disney will soon have what could be the best all-around entertainment offering on the market.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.