Disney CEO Bob Iger said the company’s direct-to-consumer service, slated to launch in 2019 after the company adds Fox assets to its stable, will be able to compete with Netflix but will “spend less on volume” than the streaming incumbent.
Speaking to Wall Street analysts during the company’s fiscal first quarter earnings call, Iger did not specify a specific budget for content. Compared with Netflix’s increasingly hefty outlays ($8 billion this year and headed upward), Disney “will not necessarily go in the volume direction that Netflix has gone,” Iger said.
“That’s not to suggest that we’re going to be low,” he emphasized. “But when you go to market with Star Wars, Marvel, Disney … Using well-known IP — we’re making series based on Monsters, High School Musical, Star Wars — will give us the ability to probably spend less than if we’d come to market without these brands.”
The $52.4 billion pending acquisition of 21st Century Fox assets not surprisingly dominated the call, more so than the company’s actual quarterly numbers, which were fairly solid.
With the company ending its output deal with Netflix after the 2018 slate (though Fox will keep its HBO output beyond that), an increased focus will be on the nature of the app’s originals. To that end, Iger was asked why Game of Thrones creators David Benioff and D.B. Weiss had not been attached to a similar multi-season series. Such a title could potentially generate a longer tail of revenue than the one-off feature films they are making under the Star Wars umbrella.
“Their interest was in creating Star Wars films,” he said. “We’ve been talking with them for some time. They didn’t express interest in a series.” The pair are “focused on a point in time in the Star Wars franchise,” he said.
While they won’t be steered by the Thrones duo, Iger noted that there are “a few” Star Wars series in the app pipeline. “We are close to revealing” one of the creators behind the first one, he said. “But the deal isn’t done.” Overall, he added, the company is “pleased by the response in the creative community to the idea of creating original properties for our direct-to-consumer app.”
Iger and CFO Christine McCarthy were asked about Hulu’s outlook given Disney’s ambitions for its own streaming service. Like Comcast and Fox, Disney owns 30% and Fox’s 30% is included in the deal — though some observershave wondered if Disney might either be forced by regulators to release it or choose to so as not to compete against itself.
In terms of original films at the studio, co-financing — a pillar of Fox’s strategy over the past two decades — is likely to wind down, Iger said.
“We’ll honor all deals that the Fox studios have in place and we’ll assess those deals once the studio is absorbed,” he said. “As you know we’ve stayed away from co-financing with the belief that you’re in for a penny, in for a pound in the movie business. You take risks every time you make a film. We’ve shown over the past five years or so that we can deliver upside and we don’t like sharing upside. It’s more likely than not that you won’t see new co-finance deals but we will respect and honor the deals they have in place.”