Disney’s upcoming launches of both an ESPN and a Disney-branded streaming service could end up garnering very different responses, according to UBS analyst Doug Mitchelson.
In an attempt to gauge the potential public interest and pricing of the ESPN and Disney OTT services, UBS reviewed the content that could be a part of the services, looked Evidence Lab survey results, analyzed Nielsen data streams, and compared ESPN and Disney OTT to other services in the market already.
“Overall, we expect healthy interest in Disney OTT, while ESPN OTT is only serving small niches,” wrote Mitchelson in a research note.
While the response expectations for the services is somewhat mixed in Mitchelson’s view, he expects the launch costs for Disney won’t be as bad as what many investors are expecting.
“Based on our analysis of the potential lost third-party licensing revenue and increased operating costs, we believe our forecasts and Street consensus already fully encompass these launch impacts ($-270 million to FY2018 EBIT; another $-200 million to FY2019), while not yet including any offset from subscribers to these OTT services,” wrote Mitchelson.
Disney’s upcoming branded streaming service will likely be priced around $5 per month in order to drive wider adoption, according to MoffettNathanson analyst Michael Nathanson. The ESPN service will likely test different prices as it prepares ESPN to be ready to go fully over-the-top, according to the report, but the Disney service is about building asset value instead of taking licensing money from SVOD deals.
“As we’ve pointed out in all of our work on vMVPDs, pricing matters and consumers have signaled that internet-delivered services should be priced materially below traditional products to drive broader adoption. Disney’s pricing strategy will be a key gating factor in determining the rates of adoption. If there are truly complementary services, it would be logical to offer a lower price point to consumers to denote the ‘add-on’ intention of Disney vs. a higher price point, would could signal a replacement option,” wrote Nathanson.