Walt Disney investor day: Disney+ announcement

Disney+

• to launch 191112, first in US, near-global after 2 yr
• 7 $/mo, 69 $/yr, ad-free (number of screens: unknown)
• downloads for offline viewing, parental controls, personalisation, supports 4K & HDR
• portfolio
• at launch: 7500 past episodes, 25 original series, 10 original movies/specials, 400 library movies, 100 recent movies
• growing to in yr 5: 10k past episodes, 50 original series, 10 movies/specials, 500 library movies, 120 recent movies
• to include all 2019 film releases after theatrical & home entertainment windows close; plans original series from Marvel, Star Wars, Pixar, Disney Animation, NatGeo
• targets 60-90m subs YE 2024 (o/w 1/3 in US long term)
• expenses
• original content spending $1b in 2020 (amortisation $500m), growing to $2.5b (for 50 originals) in 2024 (amortisation $2b)
• licensed content expense $1.5b in 2020, $2.5b in 2024
• operating expenses $1b in 2020, peak losses in 2020-2022
• profitability by 2024
• considers discounted bundle with ESPN+ & Hulu

Hulu

• 25m subs
• ad-free 12 $/mo or limited ads 6 $/mo; Live TV tier 45 $/mo
• targets 40-60m subs YE 2024
• peak operating loss $1.5b in 2019, profitability in 2023/2024
• plans international expansion

ESPN+

• 2m subs
• limited ads 5 $/mo or 50 $/yr
• targets 8-12m subs YE 2024
• operating loss $650m in 2019 & 2020, profitable by 2023
• plans international expansion

Hotstar

• 300m MAU
• free+ads or premium
• in Asia

TiVo: 69% subscribe to SVOD, taking on average 2.75 services

TiVo Video Trends Report January 2019 (survey of 4,458 in US & Canada)

OTT subscriptions

• 69.3% subscribe to OTT SVOD o/w
• 50.4% Netflix
• 21.8% Amazon Prime
• 11.9% YouTube TV
• 9.5% Hulu
• 7.5% HBO Now
• 6.9% Hulu Live TV
• 6.3% DirecTV Now
• 5.2% CBS All Access
• 4.4% Sony PS Vue
• 4.1% Showtime
• 3.6% Starz
• 3.2% Sling TV
• Essential packages
• 1 Netflix
• 2 YouTube
• 3 CableTV
• 4 Amazon Prime
• Free service usage
• YouTube 57.9%
• Facebook 43.9%
• Twitch 19.9%
• Snapchat 18.1%
• Pluto TV 17.7%
• Crackl 14.7%
• Vevo 14.3%

Bundling

• Number of OTT SVOD subscriptions: average 2.75 subscriptions (2017: 2.18)
• Most popular content bundles
• PayTV + Netflix + Amazon Prime (10.6%)
• PayTV + YouTube + Facebook (7.5%)
• PayTV + Netflix + YouTube (7.5%)
• PayTV + YouTube TV + Netflix (6.3%)
• PayTV + Netflix + Facebook (5.4%)
• Netflix + YouTube + Facebook (5.4%)
• PayTV + Netflix + Hulu (4.9%)
• PayTV + Amazon Prime + YouTube (4.4%)
• PayTV + Hulu Live TV + Netflix (3.8%)
• Amazon Prime + YouTube + Facebook (3.7%)

Hardware

• TV screen usage
• 72.7% watch TV shows
• 45.4% live sports
• 33.1% YouTube
• 27.3% gaming
• 17.9% personal videos
• 15.6% casting
• Streaming devices
• smart TV (27.1%)
• consoles (19.4%)
• Roku (17.7%)
• Amazon Fire (15.7%)
• Apple TV (13.3%)
• Google Chromecast (12.5%)

Another takeover for Disney, another spin-off for Fox

Offer

• For 21st Century Fox: $52.4b in stock; 515m new DIS shares = 25% pro forma; 0.2745 DIS for 1 FOX; plus $13.7b debt (equity value 52.4b, enterprise value 66.1b)
• Targets $2b cost savings from efficiencies
• Iger remains Chair/CEO through 2021
• Prior to offer:
• to spin off Fox Broadcasting Co, Fox TV Stations, Fox News, Fox Business, FS1 & FS2, Big Ten Network in newly listed company New Fox (2017E rev $10b, EBITDA $2.8b), to pay $8.5b dividend for tax liability of spin-off
• Fox to close the buy out of 61% of Sky prior by 180630
• To be acquired:
• TV studios 20th Century Fox TV, FX Productions, FX21.
• Film studios: 20th Century Fox, Fox Searchlight, Fox 2000
• cable entertainment networks
• international TV businesses
• Fox Networks International (>350 channels in 170 countries)
• Star India (69 channels in >100 countries)
• Sky (23m subs in 5 countries)
• stakes in Roku, Endemol Shine, Hulu (to be controlled), Tata Sky
• titles/franchises: X-Men, Fantastic Four, Deadpool, The Simpsons, Avatar, NatGeo

Rationale

• Disney
• complement & enhance (earlier content deals: Lucasfilm, Pixar, Marvel)
• stronger D2C offerings (Hulu, planned SVOD services Disney & ESPN), control of Hulu
• efficiencies
• Fox: focus
• first split News (newspapers) off to create 21st Century Fox
• next split New Fox (TV channels US) off to sell 21st Century Fox to Disney
• Studio majors remaining:
• Walt Disney: Disney, Lucasfilm, Marvel Studios, Pixar, Walt Disney Animation, Touchstone, 20th Century Fox, Fox Searchlight, Blue Sky, Regency
• Time Warner: Warner Bros, New Line, Cartoon Network, Castle Rock
• Comcast: Universal, Focus Features, Working Title, Gramercy, DreamWorks Animation
• Sony: Sony Pictures, Columbia Pictures, TriStar
• Viacom: Paramount Pictures, Nickelodeon