Thread by @ballmatthew

1/ While most have come around to the viability of #Disney’s OTT service, many remain lukewarm on its prospects. I’m very bullish for 8 reasons, most of which I find overlooked or downplayed. I also don’t worry about the fact that it’ll take years for Disney to be ‘all in’.

2/ Reason 1: IP. We all know Disney’s IP is bar none, but it’s even stronger than you think (URL). Furthermore, Disney can always use this IP to plug any SVOD performance shortfall. Given the platform’s importance, I expect they’ll do this whenever needed redef.com/original/disne…

3/ If Disney ever needs to shore up usage or subs, they’ll spin-up a new Marvel/Star Wars/Pixar/Disney series or shift a film to SVOD. To date, live-action films such as ‘Lady & The Tramp’ and ‘Noelle Claus’ have already been moved from theatrical releases to streaming exclusives

4/ No other player has pocket cards that strong. This doesn’t mean Disney isn’t cannibalizing more short-term revenues than they’ll recoup on SVOD, but it means they can ensure SVOD’s success at the flip of a switch

5/ Reason 2: Cannibalized spend. US home video sales of Disney content average $2.6-3.0B. This spend is equivalent to 36-42MM *annual* subscriptions at $6/month. Disney doesn’t even need to ask for an extra dollar, and it still becomes a top 3 SVOD just by moving spend around

6/ Why would anyone buy a $25 ‘Captain Marvel’ DVD when they could access the film, and dozens of others + plus original series, on any device at any time and for 4+ months? Or rent it for 1-2 months’ subscription fees

7/ And keep in mind, Disney only received a fraction of a fraction of that consumer spend (manufacturing is expensive, retailers markup 100%, etc.). So by going SVOD, Disney nets more revenue, and gives audiences more content, that’s more convenient and less costly

8/ Again, Disney is the leader here. They have more home video revenues than any other media company.

9/ Reason 3: Windowing. Just as Disney can shift feature windows to SVOD, it’s likely to swap the home video and SVOD release windows. ‘Black Panther’ hit DVD 3+ months before releasing on Netflix. I expect that to change when the SVOD window is Disney’s own service.

10/ As a result, Disney can both augment their SVOD service and drive even more home video spend to its SVOD service. Now home video is more expensive, for less, that’s harder to watch AND less current

11/ Reason 4: Disney’s brand is self-evident and requires no education. Yes, the content rights to the entire Disney vault will take years to fully revert and thus confuse messaging, but everyone will fundamentally understand what Disney’s selling: Disney.

12/ Apple and Amazon need to sell/educate what their brands mean and offer. HBO/Starz/Showtime/CBS are exposed to whatever their newest original is – and why you should stay subscribed after your favorite show. People love Disney; it embodies the American media identity

13/ Reason 5: Automatic improvement. It’s obviously problematic that it will take years to get back the rights to many MCU and Star Wars films (the original and new trilogies included). But as a result, Disneyflix will continually get better… without Disney doing anything

14/ Everyone else? They need to make great content to have great content. Their development pipeline is what will make them successful. Each year, Disney’s offering will automatically grow in quality and volume as old titles return. Eventually they’ll have all MCU, Star Wars, etc

15/ Reason 6: Launch Packaging. All of the big SVOD services soft-ramped from old businesses. Netflix will tell you they’d look much smaller if they’d not launched with 7MM DVD subs and a huge brand. Amazon used Prime. HBO pay-TV bundling. Apple will use Apple…

16/ Crunchyroll used pirated content, Hulu used 5-day TV rights and essentially gifted content rights. Disney will use its brand, plus the ability to ‘warm-start’ subscriptions by giving away yearlong memberships to cruise vacation buyers, with theme park passes, merchandise, etc

17/ Disney has an incredible number of touchpoints and high dollar ticket sales to attach SVOD with. They will use this. Many will argue this will inflate subscriptions, but A. It’s common, B. Necessary, C. Who cares, D. Disney has always been an ecosystem company

18/ Reason 7: Ecosystem monetization. To this end, Disney doesn’t need SVOD to be hugely profitable in and of itself, or even revenue maximizing. Disney sells IP and stories. They capture value across numerous categories and hundreds of SKUs. DIS ARPU > SVOD ARPU

19/ SVOD will be profitable for them, but it will also sustain the rest of their business (e.g. merch, live events, mobile games) and more importantly, boost overall Disney revenues and engagement through better customer data and D2C relationships

20/ Reason 8: Content bundling. Beyond ecosystem monetization, I expect Disney’s SVOD offering will eventually go far beyond video – it will bundle in almost everything Disney, from comics to books, games and merchandise. “Disney as a Service” (URL) redef.com/original/disne…

21/ To focus on just whether content volumes are high enough to sustain a standalone subscription… is to miss the overall picture in several ways. Does video quality/volume matter? For sure. But so too will other features, such as a bundled “Marvel Unlimited” comics subscription

22/ And note, each additional category expands the bucket of consumer spend to be cannibalized

23/ Challenges: It’s true Disney is late, fighting huge competitors with big leads and despite this, not going “all in” on D2C streaming – they want to have and eat their linear TV cake too. Plus, Disney is giving up billions a year in 90%+ margin, no risk revenues.

24/ I’m not very worried about being late. Disney’s brand, aforementioned advantages and cultural significance will force consumer to make room for Disney SVOD (though again, that room already exists in home video). And Disney isn’t just doing video-based competition

25/ I am a huge proponent of being “all in” – Netflix’s need to win is a huge part of the reason they’ve been so aggressive and so successful. The company had everything to lose and everything to gain.

26/ Not only will Disney not being throwing everything it has at their SVOD service, the company is not culturally rallied behind winning in SVOD at all costs. This matters.

27/ But not sure Disney needs to blow up its existing businesses (yet) like ABC, Disney XD, Freeform, its feature film business etc. Linear TV is so barely watched these days ampong target viewers that for most subs, Disney XD or ABC content will feel “first run” on Disneyflix

28/ Put another way, if Breaking Bad is seen as a Netflix show because most people watched and valued it there – then the same will apply to Disney’s linear shows that then go to their streaming platform

29/ In which case advertisers and PayTV companies are effectively giving Disneyflix massive amounts of 'free' content that Disney will use to build a new D2C empire. Sounds great. And you can’t credit Netflix for this luxury and critique Disney

30/ This isn’t to say Disney has done everything perfectly. Disneyflix should already be out, for example. And I disagree with several decisions (Fox, Sky, doing both Hulu and Disneyflix, etc.). But Disney’s moat buys them a lot of benefits, and resolves many mistakes. I’m a bull

<Fin> My pack of Disney essays here redef.com/set/media-set-…

<Fin 2> The United States has 19MM households with one child under 18 and another 16MM with at least two. Priced low enough, this isn't a hard sell to scale.

Oh, plus 80MM more households that undoubtedly watch Disney content. Marvel, Pixar, Star Wars aren't just loved by kids