Earlier this month, Disney launched their video streaming service, Disney+. This streaming service will provide all of Disney’s works and respective companies under their company (Marvel, Star Wars, Pixar, and more!). So what will this mean for the future of the streaming media market?
First, let’s get this out of the way and say that Disney did not need enter the streaming video market to continue being successful!
Disney has been one of the biggest house hold names around the world for generations, creating value in their brand and time after time making lovable family movies. This is a sugar coated way of saying that Disney is a multi-billion dollar company. So why would they invest in starting a streaming service? What does Disney hope to gain from this new venture?
Let’s start by looking at the price. Disney+ costs (approximately) $7.00/month. Their competitor, Netflix, comes in at $8.00/month. Not too large of a difference but may end up being significant to consumers when looking at the two services. If consumers consider Netflix and Disney+ to be two different types of services, then the two are not close substitutes. If this is the case then consumers would have to differentiate the two products based off of their preferences and tastes. However, if consumers see Netflix and Disney+ as very close substitutes, then we may see Netflix customers convert over to Disney+ and since Disney owns some of the largest media franchises in the world, this is a serious possible outcome.
Next, let’s look at the predicted profit from opening Disney+. Profit is found by looking at the difference of total revenue in respect to the total cost. A rational company would look at these predicted values and only choose to invest if the benefits outweigh the costs and result in positive profit.
As Disney+ was just launched several days ago, the total revenue may be hard to predict as only time (and economics) will tell the success of Disney+. However, the total cost may not be any easier. The upfront “fixed costs” endured by Disney to produce Disney+ include money to make the service, but what makes the total cost harder to predict is the costs that Disney will take in the future to invest in making new shows and movies. As well as this, Disney will most likely lose money as starting up Disney+ has now made them a competitor with he companies that they also supply (similar to Amazon – but that’s a topic for another time) and contracts to stream Disney movies on other services will end.
The future of Disney+ is uncertain, scary, and may change the streaming service market forever, leaving us with three questions: Will Disney+ undercut it’s competitors and become even more of a worldwide monopoly? What will this mean for other streaming services? And will Frozen II be any good?
For more reading: https://www.economist.com/prospero/2019/11/11/what-is-the-endgame-for-disney-