Disney and ‘Mulan' Are All In on Streaming

(Bloomberg Opinion) -- Walt Disney Co. is managing through the Covid-19 crisis in a way almost no other company can. For a business centered around theme parks that by their very definition require crowds of people, all indications from guests' anecdotes and reporting from journalists who have visited the reopened Orlando Disney World are that its safety measures are downright impressive, putting some states and local governments to shame. At the same time, Disney also appears to be making a conscious shift into another sort of company — one better equipped for a world in which perhaps fewer people hop on airplanes to visit faraway theme parks or even step foot in nearby movie theaters. And that is very telling.

Disney held its latest earnings call on Tuesday evening after reporting results that were walloped once again by the pandemic with a $3 billion hit to profit. While that was to be expected, its executives did deliver some surprises that point to how they're thinking about life after Covid. Theme parks are still the company's foundation and core, and Disney certainly isn't giving up on the box office, which justifies its big-budget blockbuster films. But here's what I gleaned from the call:

Disney really is going all in on streaming. With theaters still shut down, its studio business isn't going to make consumers wait any longer to see “Mulan,” the much-anticipated live-action remake of the Disney animated classic that was supposed to be the film of the summer. The movie will be available to stream on the Disney+ app beginning in the U.S. on Sept. 4 for a fee of $30, a rate that will vary in other countries. (Accessing Disney+ costs an additional $7 a month.) This is the biggest Disney news since it announced the launch of Disney+. It also comes on the heels of Comcast Corp.'s Universal Pictures effectively shattering the traditional theatrical window last week through a new agreement with AMC Entertainment Inc. that cuts the time Universal films air on AMC's big screens to just 17 days, down from the 75 to 90 days that is standard for the industry. Bob Chapek, who was elevated from head of the parks unit to CEO of Disney in February, said not to read too much into the “Mulan” move — yet:

“We're looking at Mulan as a one-off as opposed to trying to say that there's some new business windowing model that we're looking at. That said, we find it very interesting to be able to bring a premiere access offering to consumers at that $29.99 price and learn from it.”

Chapek said they'll be watching to see not just how many new users that brings to Disney+, but also whether the app is successful in driving transactions that normally are handled by middlemen cable providers or Apple Inc. and Amazon.com Inc. That certainly sounds like more movies could premiere on Disney+, with Chapek citing the need for more “hot tent-pole content.”

Star shines brighter than Hulu. Star is an Indian TV company that Disney inherited from last year's $85 billion takeover of 21st Century Fox Inc. It was a largely overlooked component of the transaction; rather, the focus was on gaining Fox's TV and film studios and related assets, such as the “X-Men” characters. But now Star has shot to the top of Disney's growth plans. Next year, the company will launch an international “general entertainment” streaming app under the Star brand, posing a direct challenge to Netflix Inc. The app will be stocked with Disney-owned content. The move somewhat sidelines Hulu — another of its streaming platforms — as a global competitor, with Chapek saying it has “no brand awareness outside the U.S.” Hulu, he noted, also aggregates third-party programs, which the Star app won't do. Already, Disney+ Hotstar, a streaming app in India, has 8 million subscribers, and hundreds of millions more have used Hotstar.

Bob Chapek really is CEO. Yes, we knew that already, but it previously wasn't so clear whether he was just CEO in title or function, too. After all, Iger stepped aside and took on the vague role of executive chairman just before the coronavirus began wreaking havoc on the company in a way no prior crisis has. There were reports and speculation that behind the scenes Iger was taking back the helm, a sprawling conglomerate he knows intimately and holistically and ran for 15 years. He reportedly was instrumental in Disney scoring some wins, from Walt Disney World in Florida being the “bubble” of the National Basketball Association to the smash Broadway hit “Hamilton”'s streaming debut on Disney+ in July. Iger even made the introductory remarks on last quarter's earnings call in May. This time was different;  Iger wasn't even present on Tuesday's call, which was handled entirely by Chapek and Disney's chief financial officer, Christine McCarthy. 

Chapek came from the parks side, a business people used to think of first when they heard “Disney.” Now, the company's surest path is as a streaming giant, a road that was considered too risky by some not all that long ago. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.

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