Many companies are coming out with their own streaming services, for some it makes sense, others maybe not. Disney+ is entering the foray and we wanted to look at their market entry from a strategy perspective. Does it make sense for them? Are they a fixed cost or variable business? Based on that, are they doing what they need to do to be successful over the long haul? Listen to Jenny Rae, ex-Bain consultant, as she breaks down the strategy behind the Disney Plus streaming service.
Disney+: Is It Viable?- YouTube Transcription
Disney+ one of the biggest launches of 2019. It’s the beginning of the streaming wars. Something that many analysts thought would happen five or eight years ago. But we have now on the scene Disney, we’ve got Netflix, we’ve got Hulu, Apple TV, and we’ve got more to come. And the streaming wars are super interesting from a consumers perspective, “Where am I gonna get my content?”, and “Where can I find it?”, “How much is it gonna cost me?”, and “What is my access like?”. But probably more importantly, what we’re interested in here at Management Consulted is, will this business model work and why are they launching Disney Plus instead of just licensing the content like they have for so many years?
I’m Jenny Rae the Managing Director of Management Consulted. We’re a group of ex McKinsey, Bain, and BCG consultants who advise students that are interested in going into consulting, on how businesses work. And we advise corporations on how to clarify communication and business strategy. We have a great business. We’re based in Northern California and our focus today is looking at one of these really powerful businesses, Disney+.
- First of all, we have to understand what kind of business Disney is in.
- Second of all, we need to talk about what makes a business like that successful.
- Third of all, we need to make sure that we understand whether Disney is doing what will make it successful. And we’re gonna focus today not on Disney as a larger organization, but we’re gonna focus on the Disney content pipeline.
- And then fourth, is there something that Disney should do to fix their business model?
What Kind Of Business is Disney+?
Number one, what kind of businesses is Disney in? Disney is in a high fixed cost business. You could be in one of two types, a high fixed costs, or a variable cost business. But every time you consume Disney content somebody else could be consuming it for the same cost to Disney. There are very few distribution costs that are expensive now for Disney. It used to be that they had to create a DVD, or create a video, but not anymore. For you to watch it and for somebody else to watch it, there’s a single platform and you can access it now.
What Does It Take To Be Successful?
The second point is, “What does it take to be successful?”. Well, because it’s a high fixed cost business, you either need to charge a premium for your content because you can, or you need a large number of users at a certain price point that will maximize utilization of that content. And because of the nature of streaming, it could be either one.
Is Disney Doing What It Needs To Do To Make Disney+ Successful?
Disney could have gone out to market with a super premium offering and they could have said, we’re willing to take fewer subscribers. And that’s actually what licensing content essentially was for a number of years. It was saying, we are willing to take a limited pool of dollars from bidders like Netflix, or Hulu, or other providers, to provide our content on their platform. We’re willing to take a limited amount and it’s going to make it easier. We don’t have to operate our own channels, can we lower cost but we’re not trying to maximize the number of subscribers that have access.
Disney+ is actually a tweak of their business model inside what they’re thinking. So they’re not changing to be low cost and low volume, they’re changing to be a high cost, high volume business. Assuming that they’re gonna break even sooner on new content that they’re producing. What does this give them that they never had on Netflix? It gives them access to data. To go create better and more content on their own platform which before they never saw. What people were watching, and how long they were watching it for, and how many seasons they were “re-upping” for. So they just got secondary information and it was never enough for a powerhouse like Disney.
Should Disney+ Do Anything Different?
So number four, what will it take for Disney to really succeed on Disney+? First of all, they needed to launch early, and they did a good job at that. In the streaming wars, the ones that are available first, provided they have a great content pipeline and good user experience, are going to naturally have more subscribers than some of the options that are likely to pump out content later.
In addition, they’ve done a really good job by pricing low. They’re getting a maximum number of subscribers interested, which provides them with more data for more nuanced content releases and better availability across the board. And in addition, they are already beginning to think about how they’re going to adjust their content pipeline based on the information that they’re getting from Disney Plus.
So overall we’re bullish on Disney+. We think that it’s a really great innovation inside the streaming wars. We know that not everybody is going to take advantage of it, but Disney has a really strong content pipeline that we think is going to drive a lot of users to it. So only time will tell, there may be tweaks that they’ll need to make to their strategy. But ultimately at the launch, we think Disney+ was a great idea, that does he understands its business, and is doing what it takes to succeed in this model. Thanks for watching. This is Management Consulted, and you can find us on social, and you can find us on YouTube. So subscribe to our Channel and you can also find us at www.managementconsulted.com
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