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August 4, 2020 |

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Disney reveals new global entertainment streamer Star, eyes 2021 roll-out

Disney is to launch a new international direct-to-consumer (DTC) offering named Star that will sit alongside its recently rolled out streamer Disney+, which has now claimed more than 60 million subscribers worldwide.

The new service will launch next year and will offer general entertainment programming from across Disney’s businesses, including ABC Studios, Fox Television, FX and 20th Century Studios.

While details remain scarce, the service will have a more adult-oriented feel to Disney+ and appears likely to be more akin to US-based Hulu. However, it will not carry third-party content, which Hulu currently does.

Disney CEO Bob Chapek announced the service on the company’s Q3 earnings call, saying: “Mirroring the strategy we successfully pursued with Disney+, the offering will be rooted in content we own from the prolific and critically acclaimed production engines and libraries of ABC Studios, Fox Television, FX, Freeform, 20th Century Studios and Searchlight.”

Chapek said Star would be integrated into the Disney+ platform from a marketing and tech perspective “in many markets”, with the brand name used because of its international clout. The Mouse House already operates Disney+ HotStar, for example, which was created following Disney’s acquisition of Star India from Fox. An Indonesian expansion planned for September.

Rather than just launching Hulu internationally, Chapek added: “Hulu aggregates third party content; this will not…Hulu has no brand awareness outside of the US.”

It’s also worth considering that much of Hulu’s acclaimed original programming such as historical comedy The Great, dystopian drama The Handmaid’s Tale and critically acclaimed sci-fi series Devs is tied up in licencing deals with a number of international broadcasters and streamers, making it a near-impossibility for Hulu to be able to launch in a form equivalent to its US counterpart.

Chapek said that Star “gives us the ability to market this under the Disney umbrella and have synergies with our existing platform,” and that “we see this as part of a sort of a sequential Domino strategy in terms of getting towards an offering on Disney+.”

100 million milestone

The news of the new global streamer came as Disney revealed it had surpassed a milestone of 100 million streaming subscribers worldwide, but suffered a Q3 loss of $5bn.

The company’s DTC streaming segment was the lone bright spark for the company, with Disney+ having 60.5 million paying customers as of Monday – up from 54.5 million on 4 May.

However, the results dated 27 June put the streamer at 57.5 million subscribers, below Wall Street estimates. It’s worth noting that that date was prior to the release of Hamilton on Disney+, which CEO Bob Chapek previously stated drew “a lot of new subscribers”, and the Beyoncé visual album Black is King.

LR: Bob Iger & Bob Chapek

Elsewhere in its streaming portfolio, Hulu had a total of 35.5 million subscribers, up 27% year-over-year. Within that total was a 55% year-over-year increase for its cord-cutting Hulu+Live TV product, which had a total of 3.4 million subscribers at the end of the quarter.

Sports streamer ESPN+ also continues to grow, with a total of 8.5 million subs.

Overall, the DTC segment had revenue of $3.97bn (up 2%), and operating income loss of $706m. The operating income loss was better than analyst expectations of $1.06bn.

Of the streaming business, Chapek said: “Our combined global reach now exceeds an astounding 100 million paid subscriptions. This is a significant milestone and a reaffirmation of our strategy for growth.

“The incredible success we’ve achieved to date has made us even more confident about the future of our direct-to-consumer business and our ability to be more aggressive in our approach. Going forward, this confidence, coupled with the trends we’re seeing in the multi-channel universe, will lead us to pursue even more innovative and bold initiatives as we continue to grow the business.”

‘Major force’ in global streaming

The CEO added that Disney+ – which is set to offer delayed feature Mulan – had made the company into “a major force in the global direct-to-consumer space” and reiterated plans for international expansion. As previously announced the streamer will launch in the Nordics, Belgium, Luxembourg and Portugal in September, and in Latin America this November.

Disney also announced that Disney+ Hotstar – the Indian iteration of the service which combined it with the leading native streamer Hotstar it picked up as a part of the Fox acquisition – will launch in Indonesia on 5 September.

Mulan

The company’s media networks also saw a solid quarter, with operating income up 48% to $3.15bn and revenue only down by 2% to $6.56bn.

CFO Christine McCarthy said: “At broadcasting, the increase in operating income was due to lower programming and production costs, an increase in affiliate revenue, higher program sales and lower marketing costs. These increases were partially offset by lower advertising revenue.

“The decrease in programming and production costs was largely due to production shutdowns as a result of Covid-19, partially offset by a timing impact from new accounting guidance.”

Despite continued growth for its streaming business, the ongoing coronavirus pandemic has taken a toll on the company, with theme park closures from April to June leading to an operating loss of $1.96bn in the parks and consumer products segment. The segment revenue was at $983m (down 85%).

While four out of Disney’s six resorts have reopened, limited capacity has had an effect on income.

In addition to these factors, McCarthy added: “There are considerable costs that have been put in place to achieve safety and health measures and those largely are expensed in the parks.”

The CEO added that Disney+’s growth “clearly demonstrates the value of our content,” and that the launch of a Star-branded streaming service is “further extending the value of that content internationally.”

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