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, 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+ instead of just licensing the content out like they
have for so many years. I'm Jenny Rae La Roux, 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 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 on 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. 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
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, the second point is what does it take to be successful in this?
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. 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,
it will be 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
going to 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. So number four, what will it take
for Disney to really succeed on Disney Plus? 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+. 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 understand 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, you can
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www.managementconsulted.com.