By Erich Schwartzel
ANAHEIM, Calif. -- Jolie Ninness is a mega Disney fan -- and
Netflix Inc.'s worst nightmare.
The 29-year-old medical-office employee from San Diego came to
D23, an annual gathering of Walt Disney Co.'s most ardent fans, and
quickly signed up for a three-year subscription to Disney+, the
company's forthcoming streaming service. Once it arrives in
November, she plans to cancel her Netflix subscription and instead
opt for the classic Disney titles and "Simpsons" episodes available
on Disney+.
Ms. Ninness was one of hundreds of consumers to sign up for the
three-year deal, priced at roughly $141, at the last D23 convention
before Disney+ is launched. If enough consumers like Ms. Ninness
are on board when the service premieres, it could signal that
Disney can go head-to-head with entrenched competitors such as
Netflix and Amazon.com Inc.'s Prime Video.
Disney's high-profile -- and costly -- attempt to compete in the
streaming ecosystem was center stage at D23, where a slew of new
shows and movies for the service was announced. Disney has an
arguably unmatched ability to cross-promote its top priorities,
whether at fan events like D23, at its theme parks or on its ABC
network. But to attract a core base of subscribers, the company is
offering subscription deals that come out to more than 70% off the
cost of Netflix.
The three-year offer, currently only available to those
attending the convention, will be open to any D23 club member
through Sept. 2.
In a sign of D23's importance to the company, the presentation
occupied the largest hall at the Anaheim convention center and was
kicked off by Kevin Mayer, a longtime Disney executive in charge of
its streaming efforts who is seen by analysts and company insiders
as a potential successor to Chief Executive Robert Iger.
The Disney+ library will include programming from established
franchise engines such as Marvel Studios and Lucasfilm Ltd., but
the D23 presentation made it clear Disney also wants to compete
with Netflix in reality shows and nonfiction programming.
"We have the brands that matter most," said Mr. Mayer.
Netflix declined to comment.
At kiosks on the D23 convention floor, fans lined up to enter
credit-card information and sign up for a three-year subscription,
a commitment that also grants them access to the "Disney+ Founders
Circle."
The D23 offer is about 33% off the usual price for three years
of Disney+, but what Disney loses in revenue it might make up for
in enthusiasm on Wall Street.
Disney is competing with Netflix, which already has more than
150 million subscribers, and Amazon Prime, which has more than 100
million. Investors want to see proof that Disney can quickly build
up a subscriber base that puts it on par with those services.
At an event for investors earlier this year, Disney said it
expects to have between 60 million and 90 million subscribers by
the end of fiscal 2024, at which point it should achieve
profitability.
To get there, Disney has said it expects to make a cash
investment of more than $1 billion in fiscal 2020, going up to
about $2.5 billion by 2024. The company is pulling its movies and
shows from Netflix in preparation for the Disney+ launch, a
decision the company has said will cost it about $150 million in
operating income -- but that also deprives Netflix of popular
programming including Marvel and Star Wars titles.
Disney+ is to launch in several international markets this year,
representing potential competition for Netflix's plans for overseas
expansion. And the new Disney service's focus on family-friendly
programming could eat into Netflix's subscriber base of parents who
rely on the service to entertain their children.
In July, Netflix disclosed that it had lost about 126,000 U.S.
subscribers in the second quarter, news that sent its stock price
falling. But the company -- which will soon also face streaming
competition from Apple Inc., Comcast Corp. and AT&T Inc. --
remains the one to beat, given its multibillion-dollar programming
budget and an algorithm honed by many years' data on users'
tastes.
Disney, it seems, is borrowing from that playbook in more ways
than one. A demonstration of Disney+ at D23 showed an interface
that resembles the Netflix dashboard, with rectangular images
highlighting each movie or show and programming divided by Disney
divisions such as Marvel and Pixar. Users can set up separate
profiles for different members of the family, as they can on
Netflix, or choose a kids-only option, also like Netflix.
One woman signed up for Disney+ at D23 to give her grandchildren
something to watch. Another fan picked up the three-year deal
because he noticed his favorite Marvel Studios movies were slowly
disappearing from Netflix.
In addition to the library of older Disney titles, the company
is producing new shows and movies exclusively for Disney+. Some of
the marquee shows include a "High School Musical" series and "The
Mandalorian," a new Star Wars story.
If the reaction of Disney fans at the convention was any
indication, the programming strategy was working. The announcement
that Ewan McGregor would be reprising his role as a young Obi-Wan
Kenobi in another new Star Wars series prompted cheers. News that
Hilary Duff would be playing Lizzie McGuire again in a reboot of
the eponymous series caused one young woman in the audience to
hyperventilate and say, "I can't believe this is happening."
Of course, at D23 Disney was playing to the faithful. The
broader marketplace brings a slew of challenges, especially as
households weigh how many streaming services are sufficient. So
far, Disney's inexpensive price point- -- $6.99 a month without any
discount -- is considered a major advantage. Earlier this month,
Disney said it would bundle its other streaming services, ESPN+ and
Hulu, for a monthly fee of $12.99, or the cost of a Netflix
subscription.
Disney is leaning especially hard on its Marvel Studios, best
known for theatrical blockbusters such as "Avengers: Endgame," to
draw in subscribers. Marvel is producing eight superhero shows for
the service that will complement its film slate.
At D23, Marvel Studios head Kevin Feige announced three shows
for the service, all mining the comic-book vault for new characters
such as a Muslim-Pakistani teenager known as Ms. Marvel, and
She-Hulk, a female version of the ferocious green beast.
"She's a Hulk. She's a lawyer," Mr. Feige explained.
A slate of nonfiction, documentary-style shows, including one
about working at Disney, will be on the service, as well as reality
shows such as a cooking competition called "Be Our Chef" and
"Encore!," which follows groups of adults as they restage the
high-school musicals of their youth.
But for many fans at D23, the appeal of Disney+ was getting more
of what they know.
Irene Rocha, a 39-year-old executive assistant from Carson,
Calif., paid for three years of the service to keep watching the
Marvel Studios and Star Wars movies that will soon be exclusive to
it. She will add the cost to a streaming bundle she has fashioned
for herself that includes Hulu, Netflix and Amazon Prime. New
Disney+ programming such as "The Mandalorian" is driving her to
subscribe, but so is the classic library of older titles such as
the animated "Lion King" that will be available anytime.
"I don't need to bust out my old VHS tapes," said Ms. Rocha.
Write to Erich Schwartzel at erich.schwartzel@wsj.com
(END) Dow Jones Newswires
August 25, 2019 15:54 ET (19:54 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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