Disney+ Launches in the UK on the First Day of a National Lockdown
The last two weeks have been dramatic for public companies in the wake of extreme investor reactions to the still unknown long-term economic impacts of the global coronavirus pandemic. However, media major Disney is in the fortunate position of launching its family-centric Disney+ streaming service in the UK on the first day of a UK national lockdown, with kids now being home-schooled and parents nervous about their financial futures particularly disposed towards the competitive pricing deals being offered for year-long subscription discounts.
Why the markets are misjudging Disney’s entertainment opportunity
The distinction between investor and speculator is a fine one on Wall Street. Financial markets are notorious for overreacting to good news and bad news alike. As the English economist John Maynard Keynes famously observed, the markets can stay irrational for longer than investors can stay solvent. In two weeks of panic selling, all the gains of the last four years in the US public markets have been undone and the value destruction has ranged indiscriminately across sectors – leading to the likes of Disney being placed in the same negative territory as industrial and mining sectors. However, a 30% decline in the market cap of Disney between February 17th and March 23rd shows just how erroneously markets currently view public companies at the front end of the direct-to-consumer (D2C) big bang moment. The transformative technological opportunities for increasing consumption and reach unleashed by streaming technology (all-you-can-consume on a truly global consumer scale) has now been matched by the willingness and ability of consumers to start to choose D2C in preference to other traditional entertainment outlets such as pay-TV.
As MIDiA Research observed earlier this month, the enforced home-based lifestyles being imposed by the public health requirements necessary to battle the COVID-19 virus are likely to be a precursor to a future consumer landscape both broadened and funded by universal basic income (UBI). The latest US coronavirus stimulus packageproposed by Congress has a provision for direct payments of $1,500 for all US citizens with a Social Security Number. While this is currently being portrayed as an exceptional one-off stimulus to reinvigorate a domestic economy which is now deep into negative growth territory, it will normalise the direct payment of public money to citizens based primarily upon location and nationality. The outcome in a time of dramatically increasing unemployment, remote working (removing the time sink of the daily commute), and home-parenting will be a significant rise in time available for entertainment and the increased financial ability to pay for all-you-can-consume streaming propositions. MIDiA Research’s COVID-19 | Recessionary Impacts and Consumer Behaviour report outlines how consumers now have another 15% of addressable entertainment time available for the likes of Disney+ to monetise. This provides a glimpse into how a future UBI-dominated consumer landscape could open up to differentiated and competitively-positioned mainstream D2C propositions.
Disney’s short-term pain is set to transform into long-term gain
While the near-inevitable massive spike in Disney+ engagement will be largely hidden from Disney’s Q2 (calendar Q1 results) due to the UK and the US only moving into lockdown mode at the end of the quarter, Disney is building up consumer demand and familiarity which it will be able to leverage in its battle for market share against its new D2C competitors of Apple TV+, Peacock and HBO Max, as well as the existing market leaders of Netflix and Amazon Prime.
Today’s timely launch will therefore be invaluable for Disney and should be seen as the benchmark from which investors should correctly price the entertainment opportunity for the media major going forwards.