Business & Tech

Disney+ undercuts Netflix at $7, launching costly battle

This image provided by Disney shows a product image of Disney Plus on a tablet. The video steaming service has been in the works for more than year, but Thursday, April 11, 2019, marked the first time that the longtime entertainment powerhouse has laid out plans for its attack on Netflix and a formidable cast of competitors, including Amazon, HBO Go and Showtime Anytime. (Disney via AP)
Disney via AP
This image provided by Disney shows a product image of Disney Plus on a tablet.

Walt Disney Co. will charge $7 a month for its streaming service that debuts Nov. 12, a gambit to undercut rival entertainment giant Netflix Inc. in an increasingly crowded field.

The company unveiled the service Thursday on a sound stage used to make the original “Mary Poppins,” delivering an Apple-style presentation of the online product. The platform will be several dollars less than Netflix’s most popular plan, which runs $11, and will weigh heavily on Disney’s finances. Disney+ isn’t expected to break even for about five years.

Beyond the price and technology, the service will live or die based on its content -- and that’s where Disney made a big statement. Disney+ will feature an arsenal of kid-friendly programming, including 13 classic animated movies, 21 Pixar features, original series, and material from its Marvel and Star Wars franchises.

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Disney shares rose as much as 3.7 percent to $120.86 in premarket trading Friday. Netflix was down as much as 1.2 percent to $363.40.

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“We are confident this is a product people are going to sign up in droves to have,” Chief Executive Officer Bob Iger said in a Bloomberg Television interview with Emily Chang.

Disney+ will begin rolling out to the U.S., western Europe and Asia in the first fiscal quarter, near the end of the calendar year. It will then arrive in eastern Europe and Latin America a year later.

‘Welcome Synergy’

Disney plans to spend $1 billion on streaming programming in the next year, and it doesn’t expect to make a profit until fiscal 2024, when the platform could have 60 million to 90 million customers. Two-thirds of those subscribers will be overseas, the company predicted.

Disney+ also will include “The Simpsons,” acquired in Disney’s purchase of 21st Century Fox Inc. entertainment assets last month. Borrowing the show’s cheeky tone, Disney presented a clip of the Simpsons family with a statue of Darth Vader on one side and Iger on a pedestal nearby. A signed photo of Rupert Murdoch -- the billionaire mogul behind Fox -- was in the trash. There was a “Welcome Synergy” sign above.

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“I salute our new corporate overlord,” Bart Simpson told his family, while holding Disney mouse ears. “Put on those ears.”

Disney’s newest theatrical films will head to the new streaming platform after their runs in movie theaters and home video. That includes “Captain Marvel” and the upcoming “Avengers: Endgame,” “Aladdin” and “Toy Story 4.”

The company previously had deals with Netflix and others to offer its content, but Disney gave up those partnerships -- and the revenue -- to make its own service more desirable.

Iger’s Finale

For Iger, Disney+ is a bit of a swan song. The company’s longtime steward reiterated Thursday that he expects to step down as CEO at the end of 2021, when his contract expires.

During the presentation to investors, Disney gave a peek at how the service will work. It features five tiles devoted to key Disney brands, including Pixar, Marvel, Star Wars and National Geographic. The 4K-resolution content will be available on internet-connected TVs, smartphones, tablets and other devices.

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The look and feel of Disney+ isn’t radically different from Netflix’s design. But Disney is betting that its devoted fan base will find reason to add another streaming service.

DC Edge

At $6.99, Disney+ also is beating a comic-book rival: AT&T Inc.’s DC Comics introduced a service at $7.99 a month that includes material from characters like Wonder Woman, Batman and Superman.

The new product isn’t Disney’s only streaming platform. It acquired majority control of the Hulu TV service with the $71 billion Fox deal, and it’s now considering whether to expand that product overseas.

A Hulu price cut, which lowered its entry-level, ad-supported version by 25 percent to $6 a month, helped bring a surge of customers, Disney said. Hulu expects to double its ad revenue over the next few years.

“Hulu is doing just great,” said Kevin Mayer, chairman of Disney’s direct-to-consumer and international operations. “We are really pleased.”

ESPN+ Expansion

Disney also has the ESPN+ online sports service, which will get a Latin American launch, the company said. As it expands, that product will have losses of $650 million in the next two years.

“You can figure that we will bundle ESPN+ and Disney+ fairly soon,’’ Iger said.

With Disney+, the company learned lessons from its U.K. launch of DisneyLife, which featured online access to albums, games and publications.

“The consumer was mostly interested in movies and TV,” Iger said. “No other types of media.”

Netflix, meanwhile, may face more pressure to justify its higher price. But the company has managed to raise rates in markets all over the world during the past few years, without much consequence.

Its latest U.S. price hike, announced in January, increased the cost of Netflix’s most popular plan by 10 percent to $11. Given Netflix’s grip on households, especially in the U.S., analysts expect customers to take the increase in stride.