Disney+ finally made its debut this week and now it’s a whole new world for streaming services in the U.S., one where all will have to contend with one of the biggest brands in history.
Despite tripping over some technical glitches, Disney+ could already be closing in on a double-digit subscriber total after just a few days in business.
A clearer picture of how Disney+ is performing likely won’t materialize until Disney reports fiscal first-quarter earnings early next year. For now, we can tackle questions around the service’s early outage, the mind-boggling influx of users and how, if at all, any of this impacts Netflix.
First day jitters
The inauguration of Disney+ was marred by technical problems from the get-go. Down Detector posted thousands of reports from people – who may have taken a vacation day just to make sure they saw “The Mandalorian” as soon as possible – being met with error codes, streaming hiccups and login issues. The problems largely leveled off despite a few peaks, which could flare up again on Friday when the service drops a new batch of original episodes.
With all the hype, marketing and early consumer awareness, Disney+ was bound to have the kind of blockbuster debut that can flummox even the tightest infrastructures and smartest technical teams. The question is, will it persist and is it enough of a problem to have a material effect on the service?
Emily Groch, director of insights, telecommunications at Comperemedia, bluntly answered whether she thought the early mishaps would hurt Disney+.
“I don’t,” she said, adding that Comperemedia’s social sentiment research with Infegy shows that passion around Disney and Disney+ are “crazy high.” And because of the early adopters’ passion for Disney, they were most likely the most forgiving crowd Disney could hope for.
The 10 million sign-up question
Disney provided an early glimpse at potential subscriber totals for Disney+ and the number was impressive; the company said the service had already attracted 10 million sign-ups after its first day. It’s a staggering total – especially considering peers like HBO Now and CBS All Access have been around for years and have still not hit double digits in subscribers.
However, sign-ups do not equal subscribers and there are still variables to consider around that number. First, how many of the early sign-ups will convert into paying subscribers after their seven-day free trials are up? Will the technical issues put a dent in that conversion rate? Second, how many of these early sign-ups are through Verizon, which is giving away a free year of the service to its unlimited wireless and in-home internet subscribers?
The true results will impact service revenues for Disney but as Andre Swanston, CEO of Tru Optik, pointed out, Disney+ presents so many more opportunities for the company to make money.
“[Disney] will unlock even more avenues to go direct to consumer than they ever had before,” said Swanston. “It’s not the streaming revenue but the increased opportunity for merchandising, promoting theatrical releases, leveraging viewer data, trips to theme parks and other experiences that no one is better than Disney at monetizing.”
Even before Apple TV+ and Disney+ came into this world, their imminent arrival foretold a hex upon the house of Netflix. Now that they’re here – with HBO Max, Peacock and Quibi bringing up the rear – will Netflix wave the white flag?
No. Ted Sarandos, chief content officer at Netflix, said that “nothing has changed” for his company and reiterated that Netflix doesn’t get distracted by competition.
Some industry analyst firms don’t see much of a risk for Netflix. A recent consumer survey from Piper Jaffray found that most consumers will stick with Netflix even as new services like Disney+ and Apple TV+ appear. The firm surveyed about 1,500 subscribers and found that approximately 75% don’t plan to subscribe to Disney+ or Apple TV+, while the “vast majority” of people who do plan on getting one of those new services intend to keep Netflix.
In its most recent letter to shareholders, Netflix admitted that the launches for Disney+ and other new services will be noisy but the company didn’t expect long-term effects.
"There may be some modest headwind to our near-term growth, and we have tried to factor that into our guidance,” wrote Netflix. “In the long-term, though, we expect we’ll continue to grow nicely given the strength of our service and the large market opportunity.”