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Now the hard part begins for Disney: Morning Brief

Myles Udland
Markets Reporter

Thursday, November 14, 2019

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The Disney+ launch was a huge success

Disney+ (DIS), Disney's new streaming video service, launched on Tuesday.

On Wednesday, the company announced that 10 million people have signed up for the service.

This blows expectations out of the water — in a note to clients published in late October, UBS analysts said they expected 4 million people would sign up by the end of this year and 8 million within a year of the Disney+ launch. Within five years, Disney’s highest estimates for Disney+ signups is 90 million; in less than 48 hours the company is more than 10% of the way there.

On its earnings call last week, CEO Bob Iger said Disney+ is, "the culmination of four years of planning, organizational transformation and a lot of hard work, and we're excited to be on the verge of this new era."

The company bought BAMTech to power Disney+. Disney bought 21st Century Fox to bolster its catalogue. And Disney spent hundreds of millions of dollars making content from its premier franchises like Star Wars to make Disney+ more than just a back catalogue at launch.

And although some Disney+ users faced outages on Tuesday, and while Disney's deal with Verizon certainly helped bolster sign-ups on day one, the first 48 hours of Disney+'s life is a no doubt home run for the company.

In response to this news on Wednesday, shares of Disney (DIS) surged 7.2%.

But the real work of building an enduring streaming service begins now.

"I think established IP has a leg up with consumers," Netflix (NFLX) content chief Ted Sarandos said on the company's earnings call last month. "[Consumers] know what they're getting into. There's a lot of pre-built-in excitement. It makes the marketing a little easier."

And while it's not surprising to hear Sarandos somewhat downplay the task of flipping on the switch and bringing the Disney+ monster to life, his point is that the future, enduring success of Disney+ will hinge on what doesn't yet exist. And what popularity really means in the streaming world isn't measured just in box office takes and licensing agreements.

"In this past quarter, we made a movie called ‘Tall Girl,’ a hugely unknown cast, who, in 7 days, grew their social media following into the millions on Netflix and had over 40 million people watch it," Sarandos said on the call. "That's the ability to create a brand almost out of thin air, which, I think, is every bit as valuable as drafting off a bunch of other franchises waiting for them to burn out."

Disney, of course, has a demonstrated track record of doing more or less exactly what Sarandos describes. One day “Toy Story” didn’t exist, the next day it did.

Disney Plus says it hit more than 10 million sign-ups on its first day of launch, far exceeding expectations. (AP Photo/Steven Senne)

But how franchises are conceived and thrive in the streaming world is different than a world in which viewer experiences are mediated only through liner television and movie theaters. Because streaming is a creation of and for the internet. And “winning” means you play by the internet’s measures of success: if it engages, it is successful.

In recent quarters, Netflix has emphasized at various points the social media impact its original shows and movies had on previously unknown stars. In its 2018 third quarter shareholder letter, for example, Netflix highlighted that “Stranger Things” star Millie Bobby Brown had no Instagram followers in July 2016 — a little over two years later, she had more than 17 million. (Today, Brown has 30.5 million.)

Compared to box office takes, Instagram follower counts can seem like a sort of knock-off measuring tool for a franchises's success. But unlike Disney, Netflix built its business on the internet first. In the Netflix worldview, then, Instagram measures what "the internet" — broadly defined — really thinks of its original content. Again: engagement is success.

"Content creation is booming around the world and everyone is vying for consumer attention," Netflix CEO Reed Hasting said in his latest shareholder letter.

"Over the next 10 years, many streaming services will grow viewing as streaming replaces linear TV. Our focus will continue to be on pleasing our members and growing engagement because that approach has served us well since 1997...Our focused approach to date has driven meaningful growth in our membership base and engagement."

The challenge for Disney, HBO, NBC, and others in the years ahead is learning to succeed by these metrics. Creating a successful streaming service doesn't mean you take linear content and stick it on another platform. It means you engage with new customers in new ways.

It's a shift that will surely reshape the content world in ways yet unknown to companies and consumers alike. A shift that began this week.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him @MylesUdland

What to watch today

Economy

  • 8:30 a.m. ET: PPI Final Demand month-on-month, October (0.3% expected, -0.3% in September); PPI excluding Food and Energy month-on-month, October (0.2% expected, -0.3% in September); PPI Final Demand year-on-year, October (0.9% expected, 1.4% in September); PPI excluding Food and Energy year-on-year, October (1.5% expected, 2.0% in September)

Earnings

Pre-market

  • 7 a.m. ET: Walmart (WMT) is expected to report adjusted earnings of $1.09 per share on $128.67 billion in revenue

  • 7:10 a.m. ET: Viacom (VIAB) is expected to report earnings of 76 cents per share on $3.56 billion in revenue

  • Other notable reports: Sina (SINA)

Post-market

  • 4 p.m. ET: Applied Materials (AMAT) is expected to report earnings of 76 cents per share on $3.69 billion in revenue

  • 4:20 p.m. ET: Nvidia (NVDA) is expected to report earnings of $1.58 per share on $2.9 billion in revenue

Read more

From Yahoo Finance

  • Tune into this week’s Influencers with Andy Serwer, featuring cofounder and general partner of Andreessen Horowitz, Ben Horowitz, author of the new book, “What You Do Is Who You Are: How to Create Your Business Culture.”

  • Watch the Paley International Council Summit live on Yahoo Finance starting at 10:45 a.m. ET.

Top News

A WeWork office space is shown, Tuesday, Nov. 5, 2019 in New York. (AP Photo/Mark Lennihan)

WeWork’s quarterly loss doubled to $1.3 billion as IPO faltered [Bloomberg]

China’s investment growth slows to a record low [Bloomberg]

Icahn takes stake in HP, pushes for merger with Xerox: WSJ [Reuters]

Walmart kicks off Black Friday early [Yahoo Finance]

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Exclusive: Sports Illustrated will reduce print output to monthly

How Softbank’s bet on DoorDash differs from WeWork, Uber fails

Nike exec explains why the company broke up with Amazon

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