Disney took the world by surprise back in August when it announced it would be pulling all of its content from Netflix to start its very own streaming sites, with one focused on ESPN content, and another one dedicated entirely to Disney material. At the time, it was a shocking move for one of Netflix's strongest partners and it had noticeable effect of the respective companies's stock and the decision wasn't exactly met with much enthusiasm from the general public; there was a lot of doubt surrounding the project. Will Disney be able to attract a Netflix-level audience when other websites have tried to do something similar in the past but have failed?
Disney's Got Quite The Uphill Battle To Succeed Like Netflix
According to a recent report released by UBS analysts on Business Insider, the streaming site will have to cover Disney's lost revenue from licensing fees. To give you some background, the company had considerably high earnings through the licensing of its films and TV series to other venues — like Netflix — with a reported $2 billion price tag per year and a less hefty (but still impressive) $500 million figure for streaming sites.
The pressure gets even greater because of the money that will be invested into Disney's proposed streaming platforms. You see, Disney isn't only looking for a website to house all of its pre-existing content. Mimicking the Netflix model, Disney is reportedly developing original content, including films and television shows, for their streaming platform. That means the site will need a substantial amount of subscribers to please shareholders, and also ensure the money from licensing fees and other investments are made back. Those variables are the ones reportedly putting so much pressure on Disney and it looks like they have a big uphill battle to fight if that's the case.
Here's What This Means For Disney
Here's where things could get a bit ugly. UBS Analysts report that Disney's new streaming service will need a whopping 32 million subscribers just to break even with an average $9 per month fee. Yikes.
32 million subscribers is a big number, but what exactly does that mean for an upstart streaming service like Disney's? Let's look deeper into the situation with the numbers of other sites in the same business pool. First of all, there's Netflix. A few months ago, Business Insider released a chart tracking the company's growth over the past 10 years.
The streaming giant's video on demand platform debuted in 2007 with 7.4 million subscribers. Its customer base slowly built up through the next two years, reaching 12.2 million by 2009. Things picked up in 2010 with 8 million more subscribers, but #Netflix didn't reach 33 million users until 2012, five years after its conception.
Now, admittedly, Netflix's growth happened when streaming sites weren't the household platforms they are today. Unfortunately, the business is still quite difficult. Take a look at #HBO, for example. Game of Thrones' home channel started its own app to compete with Netflix back in April of 2015. Almost two and a half years later, the site has an estimated 3.5 million subscribers, which is a considerably smaller amount when compared to where Netflix was at the time.
UBS didn't specify the timeframe expected for Disney's streaming site to reach the respectable $32 million figure, but taking into account the variety of original projects underway, it's reasonable to assume that the project doesn't have the half a decade growth-window its fellow internet content providers had.
Will Disney Be Able To Succeed?
The business world is an unstable and unpredictable environment, so it's hard to tell whether Disney will find success, but it's certainly a possibility. UBS reports that there's still hope for the site due to the growth the streaming video industry is expected to experience (which could actually create some instability for ESPN):
"While [32 million subscribers] is not a stretch at all given our bullish expectations for the growth in the SVOD [streaming video] marketplace globally, it certainly creates greater EPS [earnings] uncertainty for the next several years during a period where investors are already nervous about secular trends for ESPN."
Then there's also the company's reputation. The site will exclusively hold Disney, Marvel and Star Wars films –– most of which have proved to be great critical and financial hits. The exclusivity of such content alone will probably be a good draw for people, especially for those who prefer to consume their entertainment digitally, as opposed to physical media.
However, as mentioned, those advantages don't take away the fact that the company has a difficult road ahead of itself, especially with the people who aren't willing to distribute their money throughout different streaming services every month. We only have to wait and see what will happen when the Disney-centric site gets released sometime in 2019.
Do you think Disney will succeed in creating a new streaming site? Let me know in the comments!