In the age of the internet, services like Netflix have quickly gained millions of subscribers around the world within a span of a few years, and now that the streaming service has also started delivering its own original content, many people have begun to use Netflix as their primary source of prime time entertainment.
Disney has obviously recognized this emerging trend and plans on launching its own streaming service sometime in the later quarters of this year. However, investors are not happy as the media giant has reported millions in losses related to its absence from the streaming media arena.
The company had invested in Hulu which has resulted in a loss of around $580 million in terms of equity. The direct-to-consumer segment of the company has not been performing any better either, as it lost approximately $469 million there as well with respect to ESPN+ and BAMtech.
A Focus on Streaming
Disney CEO Bob Iger is not ignorant of where the trend is headed, and hence has shifted his focus to launching Disney’s own streaming service, one which can effectively compete with giants like Netflix. That is why the new streaming service by Disney, which will be called Disney+ (or at least that’s the plan), is planned for a launch by the end of this year.
Launching a streaming service is obviously a costly venture once we consider the huge investment in technology as well as the burden of developing content at a much faster pace. That is why analysts are expecting Disney’s losses with respect to streaming to increase at least in the early stages of Disney+.
Remnants of Past Deals
The company has not completely assumed all the stake it promised to acquire of Hulu in the $71.3 billion deal Disney made to acquire another media giant, the 21st Century Fox, which would effectively give the company an additional 30% in Hulu equity.
That leaves the 30% which Comcast owns in Hulu, and if Disney was to acquire that as well, that would naturally translate to a spike in its operating losses.
But, streaming is not an easy business to enter, and losses are to be expected.
The hope here is that millions of people around the world will subscribe to the Disney+ services once they are fully operational, which is likely considering the streaming service will feature original Disney content that is undoubtedly adored by many of us.
Of course, pricing would be a major factor which would determine demand for Disney+ considering the existence of popular streaming services as Netflix which are selling subscription for only a few dollars per month. Netflix has recently reported that it serves a subscriber base of around 139 million viewers at the moment, and the service plans on increasing prices.
Netflix Is Facing A Tough Time As Well
Although Netflix seems to be doing very well, it is still burning a lot of cash. The company is expected to invest somewhere around $10 billion in the development of new content for its audience, which has been partially funded by debt that obviously needs to be serviced in the future.
The only way it can sustain in the future is if its subscriber base increases, which may become difficult once Disney+ and other streaming services come into the picture.
Since streaming is increasing in popularity, Disney’s decision to launch Disney+ definitely comes as good news for investors who have become aware of the shifting preferences of consumers.
People are moving away from traditional sources of entertainment to these low-cost streaming services, and demand for these traditional mediums is bound to falter in the future. There is no doubt that Disney has made the right move.
Now only time will tell how effectively it will be able to compete with other streaming services out there in the market, especially those which have already built a stable subscriber base like Netflix.