Disney CEO Bob Chapek acknowledged the ongoing tensions developing among high-profile talent and studios that have put their blockbusters on streaming channels instead of releasing them first in theaters.
"The talent deals going forward will have to reflect the fact that the world's changing," Chapek said, speaking virtually at the Goldman Sachs Communacopia Conference. "There's a bit of a reset going on right now."
"Black Widow" star Scarlett Johansson sued Disney in July for releasing the film directly to Disney Plus instead of theaters, and argued that was a breach of her contract. Chapek didn't reference the lawsuit or name Johannson directly, but he implied it could change how Disney does business.
Johannson was to be compensated based on box office performance and could have lost up to $50 million from the movie skipping theaters, according to the Wall Street Journal.
Chapek said that many of the deals brokered with stars were done so before the pandemic altered the theatrical window.
"So we're sort of putting a square peg in a round hole right now, where we've got a deal that's conceived under a certain set of conditions," he said.
"We'll think about that as we do our future talent deals and plan for that, and make sure that that's incorporated. But right now we've got sort of this middle position where we're trying to do right by talent," Chapek added.
The dispute is unfolding amid larger concerns for Disney. Chapek warned investors that Disney Plus subscriber growth is likely to slow in the fourth quarter adding users in the "low single-digit millions" as pandemic-fueled production delays limited their movie debuts.
Coronavirus pandemic lockdowns and regulations put a massive strain on Disney's ability to churn out content for its streamers at the rate it typically targets and it has also thrown a wrench in their theatrical release schedule.
"COVID-induced production delays is a kink in the supply chain for new content," Chapek said, adding that "this is short term."
He reported Disney has 61 movies and 17 shows in production right now. The Disney TV division has over 200 active productions globally.
Former NBC Studios president and UCLA School of Theater, Film and TV Lecturer Tom Nunan said production delays are standard for an industry reeling from the pandemic.
"The production footprint around the world has been forever changed by COVID," Nunan said. He added there's a sort of post-coronavirus "hangover from just the obscene kind of buying that consumers went on (subscribing to streaming services) during the height of the pandemic, here and abroad," as people begin to resume normal life.
Nunan said it was surprising Disney only had 200 global TV productions active given the number of properties they own across film and television.
Disney shares closed down 4.17% on Tuesday.
The company reports fourth quarter earnings Nov. 11.
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Boosted by "Cruella," "Loki" and "Luca," Disney Plus added 12.4 million subscribers between April and June, bringing its total to 116 million. Disney beat Wall Street expectations for revenues and subscribers to its streaming star, and saw its theme parks return to profitability for the first time since the pandemic began, the company reported Thursday.
Disney stock shot up more than 5% in after-hours trading.
The theme parks, traditionally Disney's cash cow, were brutalized by the pandemic to the tune of $1.6 billion in lost income over the previous nine months, the company said. But in the quarter ending July 3, that business line saw a profit of $356 million, a big swing from its $1.8 billion loss in the same period last year.
But chief executive officer Bob Chapek is all in on streaming, reiterating that Disney Plus is his company's "top priority." Disney turned over $17 billion in total revenue, of which about 25% came from its streaming entities, which also include Hulu and ESPN Plus.
People across the entertainment industry are watching closely to see how Disney handles its increasingly heated battle over the theatrical-release window and whether it can deftly handle relationships with Hollywood talent. The company is facing a lawsuit from Scarlett Johansson, who claims Disney breached her contract by debuting "Black Widow" on Disney Plus the same day as in theaters.
Chapek doubled down on Disney's stance of taking release strategies film by film.
He confirmed that Marvel's "Shang-Chi" will go ahead with an exclusive release in theaters in September, yet not without a hint of regret.
"When we planned 'Shang-Chi,' that title was planned on being in a much more healthy theatrical environment and at this point, unfortunately, due to distribution agreements we have and just the practicalities of last-minute changes, it wouldn't be possible" to change it, he said.
Instead, Chapek said the company is viewing the film's 45-day exclusive window as "another data point" to inform Disney's future decisions.
The company did not comment directly on the performance of "Black Widow," which debuted after the quarter's end. Chapek did, however, echo Disney's prior dismissal of Johansson's argument.
"Since COVID has begun, we've entered into hundreds of talent arrangements and by and large they've gone very, very smoothly," he said.
Disney remains well behind Netflix in terms of subscribers, but the company thinks it has plenty of room for continued growth. Following launches this quarter in Thailand and Malaysia, it plans to expand its footprint in Japan, South Korea and Hong Kong later this year.
About 40% of Disney Plus subscribers come from its international Disney Plus Hotstar package, which charges varying rates by geographic markets. Disney Plus costs about $8 per month in the U.S., but worldwide the average monthly revenue per user is just over $4 – a figure that declined almost 10% on the quarter.
Disney also announced a "Disney Plus Day" on November 12, the two-year anniversary of the service's launch. Chapek described it as an effort to boost subscribers, in conjunction with strategic releases of new content, including a Thanksgiving Day debut of a six-part series about The Beatles directed by Peter Jackson.
Buried in the earnings report was a $217 million writedown of DraftKings. Disney acquired about 6% of the sports betting website when it bought 21st Century Fox in 2015. Sports are emerging as an increasingly important battlefront in the streaming wars, and some investors have been calling for Disney to make its ESPN brand more of a focal point in its streaming efforts.
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As Netflix dips into gaming, streaming competitors are gobbling up its market share, new data shows.
In the last two years, Netflix and Hulu's combined share of streaming video subscriptions in the U.S. has dropped from nearly 75% to below 50%, according to New York-based analytics outfit Antenna.
The new data show as those behemoths mature and growth slows, their upstart competitors are charging in. Disney Plus (17% share), HBO Max (11%) and Paramount Plus (8%) have steadily elbowed their way in since 2019, just as the pandemic reshuffled theatrical releases and increased the profile of streamers.
Meanwhile smaller niche services have grown at an even faster clip than their larger competitors.
Subscribers for the ten so-called "specialty" subscription streamers that Antenna tracks — including Cinemax, BET Plus and Sundance Now — have collectively grown 74% over the last two years. The larger streamers, including Disney Plus, Netflix and Hulu, have grown just 30%.
While their growth rates are larger, these niche streamers only have a small fraction of the market. Whereas Netflix has over 200 million subscribers, Acorn TV, Shudder and Sundance Now – all of which are owned by AMC Networks – have fewer than 9 million subscribers combined.
"Netflix and Hulu are so well saturated in the U.S. market. So you can't expect them to grow at the rate they used to," said media analyst Dan Rayburn.
Antenna derives its data from aggregating credit card transactions and email receipts from about five million Americans' mobile apps, then blending it with internal models to estimate metrics like sign-ups, subscribers and churn rates.
Absent from the figures is noteworthy streaming platform Amazon Prime Video, which comes included with an Amazon Prime subscription, and has an oncoming infusion of content following Amazon's $8.45 billion acquisition of MGM Studios.
In the year to June 2021, the fastest growing services in the U.S. in terms of subscribers were Sundance Now (83% growth year-over-year), Paramount Plus (81%), EPIX (74%), HBO Max (72%) and BET (71%), according to the data.
Netflix U.S. subscribers actually fell by 1% in the period, while Hulu (6%) and Disney Plus (27%) saw relatively tepid growth – albeit from significantly higher subscriber bases than many of their smaller, faster-growing competitors.
And the relatively high growth rates among the specialty services, which stream fare for specific audiences like fans of British TV or horror, suggest there may be room for niche services to survive the streaming war, which remains an open question.
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