Commentary
Disney+ Could Rival Netflix's Subscription Levels By 2020's End - But Is It Profitable?
- by Wayne Friedman , Staff Writer, January 6, 2020
Media analyst Bernie McTernan of Rosenblatt Securities estimates Disney+ could have just under 40 million subscribers at the end of the year -- more than double the initial Wall Street estimates of 18 million.
McTernan believes Disney+ already has 25 million subscribers -- for a service only two months old. By way of comparison, Netflix took around 10 years to get to its current number: a 60 million+ U.S. subscriber level.
Surely, Disney+ got that big boost -- 10 million or more -- from Verizon’s deal to offer broadband customers free Disney+ for a year.
In addition, many analysts might credit this rise to modern TV consumers' increasing acceptance of TV streaming services -- paying for as many as three to five streaming services per month.
Which is why major legacy TV companies want to quickly launch their own streaming efforts -- subscription/no advertising services, ad-supported/free services and everything in between.
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It isn’t just NBC’s Peacock or AT&T’s’ HBO Max, but other traditional pay TV companies -- such as ViacomCBS, Discovery, AMC Networks -- pushing premium streaming efforts. Those companies have a couple of niche services already out -- with ViacomCBS’ bigger and broader-based CBS All Access making steady gains.
Inclusion into a key group of three to five big streaming services may come at the expense of existing traditional pay TV services -- cable, satellite and telco, which means some collateral damage to specific networks. Still, for the time being, other analysts believe new streamer sign-ups could be a consumer add-on, with much content overlap.
Brand awareness will have much to do with success. For example, in a Rosenblatt Securities survey of more than 200 streaming-video consumers conducted on Dec. 29, McTernan says 96% of respondents are now aware of Disney+. In October, it was 63%.
It's fair to assume some of this consumer interest will have a spillover effect on other streamers, which will create higher business metrics -- including growing subscribers.
But it also raises confusion about where the business will land. For instance, which companies will really make money from these narrow profit-margin businesses once initial marketing promotions and hype fade?
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
Wayne, the real question concerns the role of advertising in SVOD---or AVOD, actually. It's not hard to see the TV/Hollywood powers entering the SVOD frey with ad-free services and competing with Netflix for subscribers using their vast libraries of content. But once this goal is accomplished, it's also easy to see the successful SVOD newbies offering high CPM ad-supported platforms---which could be very profitable if they attain reasonable penetration levels. In other words, the ad-free services might not be huge money makers---depending on how profitability is calculated---but they would be the launch pads for smaller and profitable ad-supported platforms.
It certainly will be a fascinating plot to watch unfold. That said, I certainly wouldn't bet against Mr. Iger. Perhaps we should also consider that some of the same "narrow" margin arguments were cast upon Google's early days. Given the course changes in brand messaging, it might not be "all about" monetization through spot sales. We might be seeing an era of innovation in the product placement biz.