On Tuesday afternoon, the Walt Disney Company held its 2019 first-quarter earnings call. Unfortunately, nothing major—you know, like the Star Wars: Episode IX title—was revealed, and CEO Bob Iger stressed that the real juicy tidbits will arrive during Disney’s investor presentation on April 11. But that doesn’t mean we didn’t get to enjoy any worthwhile reveals that paint a picture of the conglomerate—and how its upcoming decisions will affect its fans’ viewing habits—moving forward.
Let’s break down the major takeaways.
Direct-to-Consumer Business Will Play a Key Role
“DTC remains our No. 1 priority,” Iger announced, stressing that much of the company’s long-term growth plans are tied to the direct-to-consumer business. That means it’ll have some early growing pains with hopes of reaping major profits down the line. Per the Mouse House brain trust, the company will forgo $150 million in year-over-year licensing revenue with the launch of Disney+ as it recalls all of its major titles from Netflix and the like.
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“How does Disney make up that revenue? It’s going to take a few years to balance the new costs of the streamer plus that loss of revenue,” Michael Beach, CEO of Cross Screen Media, told Observer last month. March’s highly anticipated Captain Marvel will be the first feature film withheld from licensing partners.
Long term, Disney+ will rely on homegrown content, but there will be occasions when the service licenses series from third-party producers, especially as the Magic Kingdom waits for the Fox deal to receive official regulatory approval. Iger has previously said that Disney+ will not cost as much as Netflix due to the disparity in their catalog sizes. However, Disney’s marquee franchise attractions—including Marvel, Star Wars and Pixar—do help offset that difference.
In the meantime, Disney’s other DTC service, ESPN+, has grown to more than two million paid subscriptions. That’s more than double the number from a few months ago, which coincides with the launch of UFC on ESPN.
So What’s the Future of Hulu?
Once the Fox deal is made official, Disney will take a controlling stake in Hulu, which recently hit 25 million subscribers. Unfortunately, Disney is experiencing “growing equity losses in our investment in Hulu” as the streamer was projected to lose the company $250 million in 2018. But Iger and the company have plans to make a sizable deposit into Hulu’s bank accounts and use prestige content from the lauded basic cable network FX to help attract more customers.
“We intend to fully leverage the brand in both traditional and new businesses,” Disney executives said. “There’s ample opportunity for FX to produce more programming, especially for Hulu as we look to expand the streamer.”
Clearly, Disney has a lot invested in Hulu—and direct-to-consumer business as a whole.
Does Deadpool Have a Place at Disney?
“We’re not looking to compress the theatrical window,” execs said. The company’s theatrical output—just 10 films in 2018—has been the source of much speculation, especially as the Fox sale draws closer to completion. “We have the production capabilities that enable us to scale up our output.”
That includes the Marvel Cinematic Universe. On the call, Iger reaffirmed his previously statement that Ryan Reynolds’ R-rated Deadpool franchise can and will work under Disney despite the studio’s history of producing family-friendly content. Iger even left the door open for other R-rated Marvel projects, which lends credence to the recent rumor that Scarlett Johansson’s Black Widow solo film could earn that rating as well.
“We do believe there is room for the Fox properties to exist without significant Disney influence over the nature of the content,” Iger said. “Meaning that we see that there is certainly popularity amongst Marvel fans for the R-rated Deadpool films, for instance. We’re going to continue in that business, and there might be room for more of that.”
With the addition of 20th Century Fox, its many adult-skewing franchises such as Kingsman and Planet of the Apes, and prestige awards player Fox Searchlight, Disney has the opportunity to greatly expand its sphere of influence (i.e., use more curse words and win some Oscars). While the versatility will be welcome, it will also be a significant departure from the company’s longstanding modus operandi.
“No feature-film studio in the history of Hollywood has had a batting average even remotely as close to as high as that studio has, and they fundamentally decided to make a lot less movies but put more investment and more time and more energy and more marketing into the ones they make,” FX CEO John Landgraf recently said of Disney.
Can it pull off such a seismic shift seamlessly? It’s doubtful, but if any studio could do that right now, it’s Disney.
