With Bundle In Hand, Disney And WBD Headline Crucial Earnings Day

Thursday, 8 August 2024, 7:21 am
Press Release: Parrot Analytics

Wednesday was a pivotal day for the entertainment industry with the two largest US media companies by corporate demand share reporting earnings.

Despite their cultural dominance, The Walt Disney Company and Warner Bros. Discovery face significant hurdles due to declining fortunes from linear TV, the evolving streaming landscape, and the uncertain future of their prized franchises.

As much as they have in common, these legacy firms diverge when it comes to long term viability. Disney’s stock price is stuck at roughly half its March 2021 peak. But no one questions the Mouse House’s ability to survive, with a diversified revenue base, larger scale in streaming and one of the most beloved brands in the world.

Meanwhile, WBD has lost roughly two thirds of its valuation since debuting in April 2022, and with a $39B debt load even after drastic cuts, CEO David Zaslav all but put the company up for sale with recent comments at Sun Valley.

Nevertheless, Disney and WBD are working together to challenge Netflix's dominance with two new streaming initiatives: an SVOD bundle and a sports streamer launching this fall.

Disney-Max Bundle

The recently launched Disney-Max bundle offers massive scale and helps the two legacy companies put up a stronger front against Netflix than they could individually. Disney+, Hulu and Max combined have more than double the audience demand versus Netflix’s current industry-leading catalog.

With upcoming price hikes across Disney streaming starting in mid-October, assessing the value of a subscription dollar is more important than ever. Parrot Analytics’ Pricing Framework reveals that the while Disney-Max has the highest volume of both supply and demand, the current Hulu-Disney+ bundle ($19.99/m) and Netflix’s Standard offering ($15.49/m) are more steeply discounted relative to their catalog of in-demand shows and movies.

That said, Parrot Analytics supply data shows very little catalog overlap between the three platforms, meaning there should be limited subscriber cannibalization. The bundle will likely serve as a strong subscriber retention tool, but how much subscription growth it can propel remains to be seen.

Venu Sports

WBD and Disney, alongside FOX, are also teaming up on Venu Sports, offering over-the-top access to major North American sports leagues and top level college sports.

One of the platform’s initial draws was meant to be the premium NBA package on WBD-owned TNT. However, the impending death of the NBA on TNT — barring a legal full-court buzzer beater — significantly harms Venu Sports two times over. First, subscribers get fewer NBA games starting with the 2025-26 season. Second, the NBA’s new rights deal splits up TNT’s games between Comcast and Amazon Prime Video, meaning fans will seek out those missing games outside of Venu Sports.

Franchises and Brands

Franchise IP has driven the fortunes of both Disney and WBD for decades. It is the engine behind the famous and elusive flywheels industry analysts are always squawking about. However, Disney’s Star Wars and Marvel are in various states of decline.

Disney+ is seeing diminishing returns for its high profile Star Wars live action series. The average season one global demand for the three most recent releases has dropped 17.3% compared to the first three, with the peak demand down 13.4%. With steadily rising production costs, this lower return on audience demand should be a red flag for Disney.

When it comes to movies, there will end up being a seven year gap between Star Wars releases. Meanwhile, declining box office receipts for Marvel movies that aren’t led by Ryan Reynolds have reshaped the public perception of this once untouchable arm of the Disney Empire.

For WBD, HBO’s House of the Dragon has been the number one show worldwide across all platforms since its season two debut. It has also boosted demand for Game of Thrones, the world’s third most in-demand series across all platforms over the same time. This is welcome news for the Max platform, which has been dogged by plateauing subscriber growth.

WBD’s DC Universe is in the early stages of a rebrand, with The Penguin coming to Max in September as an early test run and James Gunn’s full reboot kicking off in earnest with 2025’s Superman. WBD’s most valuable and respected brand is HBO, which it removed from its flagship streamer’s name last year, but seems to be reversing course in 2024. Several would be ‘Max Originals’ from the DC, Harry Potter, and It franchises are now set to become HBO linear debuts.

The key question for both companies — and all major players who want to compete in the 2020s and beyond — is how to best leverage audience demand for beloved franchise IP. Selling nostalgia to millennials works for now, but how sustainable is it long term? The next iteration of blockbuster entertainment requires a careful calculus of creative talent and insights into audience behaviors.

Disney-Max Catalog Overlap

• One of the bundle’s main advantages is combining three very different platforms that cater to varied audiences. Parrot Analytics’ Content Panorama, which tracks streaming platform catalogs, shows only a minimal overlap between the TV catalogs of the libraries involved.
• Just over 7% of titles are shared across Max, Hulu, or Disney+, underscoring the uniqueness of each catalog. As of Q2 2024 (Disney’s Q3 2024), 2.3% can be found in both Hulu and Disney, 4.9% are shared between Hulu and Max, and none between Disney+ and Max.
• The combined platform will largely consist of content previously unavailable on the other platforms. Hulu, the largest TV catalog of the three, will provide 43.2% of the new platform’s catalog, while Max’s shows would account for 36.6% and Disney+, the smallest of them, only 13.0%.
• This small overlap means that there will be little to no cannibalization between the platforms involved, greatly expanding the viewing options for subscribers who switch from one of the platforms to the new service. However, the overlap between consumers who already subscribe to all three platforms is unknown.

Bundle On Platform Demand Share

• While demand for original content drives subscription growth, library content is key for customer retention, one of the most important streaming goals for Disney and WBD.
• This data highlights one of the main benefits of the bundle — scale.
• The three platforms combined have more than double the US audience demand compared to Netflix, which has been able to pull away from the competition in recent years largely due to its massive scale.

Corporate Demand Share

• Corporate demand share assesses the long-term viability of the top media companies as they look to consolidate their original content’s availability exclusively onto their own platforms, and can effectively help value a conglomerate’s legacy and library content in aggregate.
• Disney and WBD have been the top two media conglomerates in corporate demand share since April 2022, when WBD debuted. Disney has historically boasted the largest slice of this pie chart. These two companies alone account for 35.3% of the demand for all TV content with US audiences as of Q2 2024 (Disney’s Q3).
• WBD’s most straightforward path to leapfrogging Disney in this category is to join forces with a competitor. With Paramount spoken for, a combination with NBCUniversal would put the new entity well ahead of Disney in Corporate Demand Share.

M&A Cheat Sheet: NBCUniversal & Warner Bros. Discovery

• Warner Bros. Discovery CEO David Zaslav effectively put all options on the table for his company earlier this month. Comcast may be the best positioned company to acquire WBD, or spin off NBCU to merge with WBD as a separate entity.
• This hypothetical marriage of convenience makes sense from a scale perspective. It would surpass Disney as the top media company by corporate demand share. WBD’s lack of a broadcast network makes this more palatable to regulators regardless of who is running the FTC in 2025.
• The fate of Comcast's Streamsaver bundle, combining Peacock, Netflix, and Apple TV+, is a significant factor in any merger analysis. If Comcast acquires ownership in both the Disney-Max bundle and Streamsaver, it could potentially redefine the entire streaming landscape through a comprehensive re-bundling strategy.
• Zaslav views himself as a peer to Comcast CEO Brian Roberts, making the executive structure of a future company a delicate matter. Roberts has made high profile bids for Disney and Fox in the past, so another similar attempt would be in character.

© Scoop Media

Parrot Analytics

Global television demand measurement

Parrot Analytics is the leading global content demand analytics company for the multi-platform TV business. With the world's largest TV audience demand datasets, the company currently tracks more than 1.5B daily expressions of demand in over 100 languages from 200+ countries to reveal the content consumers engage with and watch the most across platforms.

As a trusted partner to some of the biggest media companies and content creators in the world, Parrot Analytics optimises content workflows in real time. The company's TV analytics products result in better production, distribution, acquisition and marketing decisions, as well as accelerated SVOD platform success.

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