Disney announces streaming service aimed at taking on Netflix
Walt Disney revealed its ambitious plans for a streaming service aimed at undercutting Netflix, pitting the world's largest traditional media company against technology outfits in a high-stakes battle.
Disney+ will feature shows and films from the company's properties, such as Star Wars and Marvel, and will set back customers just $7 per month, or less than $6 a month when paid annually — almost half the price of a standard Netflix subscription.
The advertisement-free service will launch in the US on 12 November, with Disney vowing to pour more than $1bn in 2020 into producing content aimed at persuading fans of its franchises to join.
Chief executive Bob Iger said Disney was offering a streaming platform that "no other content or technology company can rival", citing a time of "extraordinary" change in entertainment and the legacy of Walt Disney himself, who the CEO said had set a precedent to "create change, not just to sit back and watch it happen".
However, Disney's foray into the streaming world will be costly, as, in addition to the costs of investing in content and technology, the company expects to lose $150m in licensing money per annum by pulling its content from Netflix.
Disney doesn't expect the service to be profitable until fiscal 2024, when it anticipates having between 60m and 90m subscribers.
Disney+ will offer up more than 500 films and 75,000 television episodes by 2020, including all six original Star Wars films, 18 Pixar films and the complete Simpsons collection.
Analysts at RBC Capital Markets reiterated Disney as their 'top pick' in the media sector on Friday, stating that its investor day had exceeded expectations and that it "should" turn sentiment bullish.
"The extensive content and completeness of key areas like Pixar and Star Wars was a positive surprise, and the ARPU suggests subscriber, rather than revenue, maximization early on.
"It looks like game on for strong sub growth at launch."
As of 1120 BST, Disney shares had grown 3% in pre-market trade to $120.10each.