Disney had recently announced it’s split with Netflix and a new Disney owned streaming service in the works. Now, an analyst named Michael Nathanson from MoffettNathanson thinks he knows what price point Disney will set this new service at–$5.00 a month.
Besides the new Disney content based service Disney is also said to be launching an ESPN streaming service. Mr. Nathanson believes that service will have different pricing as Disney’s goals for it are different than it’s goals for a their IP streaming service. An IP streaming service is meant to further IP and asset value for things like licensing and promotion. The ESPN is more about being a sports channel and offers different pricing options.
“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” Nathanson explained.
The price point of $5 a month gives users the perception of a “good deal” in relation to the services offered. Let’s face it, people have been about the bargain since the economy dipped a few years ago. He estimates at this price point Disney will see about $34-$38 million in the first year and about the three year outlook would be about $230 million. But as fiercable.com points out:
But with the loss of Netflix licensing revenues and accelerated marketing costs for launching the new service, Nathanson predicted Disney’s losses will increase by about $200 million to $425 million per year.
Nathanson predicts by 2020, the first full year out of Netflix’s paid program, will put Disney at about a net loss of $280 million and by 2021, provided the marketing works and subscriptions increase, a loss of about $260 million.
I’m sure Disney can hold it’s own until the service stabilizes, and again, they are viewing it as a way to leverage IP and licensing money. They will still come out ahead if all goes as planned.
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