Streaming venture leads Disney to 29% revenue surge

The Walt Disney company has reported a 29% increase for year-on-year revenues thanks to its streaming bet, but COVID-19 has forced the team to withhold dividend payments.

The impact of the coronavirus pandemic is clear over the last three months, as Disney has been forced to close all theme parks and the majority of retail stores, while there have also been supply chain disruptions. The launch of Disney+ has offset much of the negative, while the suspension of dividend payments should save the company somewhere in the region of $1.6 billion in cash. This saving will become very useful as the team continues international launches for the streaming venture.

“While the COVID-19 pandemic has had an appreciable financial impact on a number of our businesses, we are confident in our ability to withstand this disruption and emerge from it in a strong position,” said CEO Bob Chapek.

“Disney has repeatedly shown that it is exceptionally resilient, bolstered by the quality of our storytelling and the strong affinity consumers have for our brands, which is evident in the extraordinary response to Disney+ since its launch last November.”

Walt Disney revenues for Q2 2020 and H1 2020 (USD ($), millions)
Three months to March 28 Year-on-year Six months to March 28 Year-on-year
Revenues 18,009 21% 38,867 29%
Net income 475 (91%) 2,608 (68%)
Free cash 1,910 (30%) 2,202 (39%)

Source: Walt Disney Company Investor Relations

Looking across the business, Disney has been impacted quite severely by the coronavirus outbreak:

  • Cinemas are closed impacting theatrical release and delay to home entertainment revenue
  • Production for new content has been halted
  • Advertising for broadcast TV has been dampened, impacting ESPN and Hulu
  • Parks, hotels, experiences and retail footprint are closed
  • Construction and maintenance is on-hold
  • Benefits and synergies of $71 billion Twenty-First Century Fox acquisition delayed

There does seem to be light at the end of the tunnel for the parks and retail business unit with business returning to normal in China. The Disneytown shopping and entertainment complex has been reopened, while Shanghai Disneyland is scheduled to reopen next week. The team will hope these timelines are replicated around the rest of the world.

There will of course be negative consequences for every business during this unique period, however, Disney does of course have positives to point to. Most notably, the launch and expansion of its streaming platform, Disney+, and new content which has been released on other content platforms.

ESPN has seen viewing figures increase by 11% year-on-year, thanks to the release of Michael Jordan and the Chicago Bulls docuseries, The Last Dance, and the NFL draft, which took place virtually. But it is Disney+ which steals the headlines here.

Over the first five months, Disney+ has bagged 54.5 million subscriptions, vastly exceeding expectations, while there are still lucrative launches in Japan, the Nordics and Benelux over the next few months. The team is not providing much insight on when it plans to break into profitability, but adoption trends around the world are very encouraging to date.

Performance of Walt Disney media assets to March 28
Subscribers (million) Year-on-year Monthly ARPU ($) Year-on-year
Disney+ 33.5* 5.63
ESPN+ 7.9 359% 4.24 (17%)
Hulu (SVOD) 28.8 24% 12.06 (5%)
Hulu (Live and SVOD) 3.3 65% 67.75 29%

*Does not include April subscriber acquisition

This is a major growth asset for the business, especially under the current circumstances. Interestingly enough, there might be an opportunity to offset losses, by releasing certain titles directly on the streaming platform, cutting out theatrical release.

“As you know, we had seven $1 billion films in calendar year ’19,” said CEO Chapek. “But we also realize that either because of changing and evolving consumer dynamics or because of certain situations like COVID, we may have to make some changes to that overall strategy just because theatres aren’t open or aren’t open to the extent that anybody needs to be financially viable.

“So we’re going to evaluate each one of our movies on a case-by-case situation as we are doing right now during this coronavirus situation.”

Releasing in theatres is a big financial draw for Disney, but it also comes with a significant financial outlay. Marketing dollars will still have to be attributed to launches on the streaming platforms, but with content consumption trends shifting more to on-demand, in the living room and the real world, it might make more sense to skip the cinema for some titles.

NBCUniversal has already started releasing some titles on streaming platforms for an additional premium. It has been stated this is due to COVID-19, but it might not be a temporary trend for all titles. Not only is it likely to be cheaper, it satisfies consumer demand and makes the streaming platforms more attractive to subscribe to.

The content business unit is holding the Disney empire up as all the other pillars crumble in the background. Disney is not a company which will ditch its physical business, but success attracts dollars. Chapek has said he remains ‘bullish’ on international expansion of Hulu, while Disney+ is looking like a rip-roaring success. The Walt Disney Company could look like a very different organisation in a few years.

Disney+ gets off to a flier

Walt Disney executives might have believed the pieces were falling into place to a blockbuster debut, but perhaps even the biggest optimists would have failed to see this coming.

Having launched in the US to much fanfare and collecting 28 million subscriptions in the first six weeks, the team attempted to emulate this success across the pond. There is still a lot of room for growth for the streaming platforms in Europe, and Disney is certainly making a splash.

Five months after first launching the services, Disney is claiming to have secured 50 million paying subscriptions. Momentum should continue to gather over the coming months meaning it should easily surpass the self-imposed target 60 million and 90 million global subscribers by 2024. On this trajectory, it could hit the milestone by the end of year one.

By way of comparison, Netflix claimed to have 158 million subscribers at the end of January and took five years to get to 80 million subscribers.

“Disney is going to smash its own publicly announced subs target,” said analyst Paolo Pescatore of PP Foresight. “Disney+ is a blockbuster hit with users. The biggest challenge will always be keeping users entertained. It is fair to say that many users would have signed up to the annual offer or bundles on both sides of the pond. This will help maintain its total base steady for the first year.

“However, Disney and others are not immune to the current challenges of filming new shows. This will have a knock-on effect next year. All eyes are now on Netflix’s first quarter results to see if Disney+ has had a negative impact on subs base.”

As Pescatore states, the risk which Disney faces in the short- to mid-term future is a lack of new content. In terms of depth, it cannot compete with Netflix which has been investing billions in an incredibly varied strategy to create content for ever type of consumer, in every different market. With COVID-19 encouraging more consumers to stream content, the scrutiny will be on the services in ways executives might not have anticipated.

But for the moment, the numbers are encouraging.

“We’re truly humbled that Disney+ is resonating with millions around the globe and believe this bodes well for our continued expansion throughout Western Europe and into Japan and all of Latin America later this year,” said Kevin Mayer, Chairman of Walt Disney Direct-to-Consumer & International.

“Great storytelling inspires and uplifts, and we are in the fortunate position of being able to deliver a vast array of great entertainment rooted in joy and optimism on Disney+.”

What is unknown for the moment is the regional split of these subscribers. Disney+ has been launched in the US, eight European countries (UK, Ireland, France, Germany, Italy, Spain, Austria and Switzerland) and India.

If Disney+ collected 22 million subscribers in the US by Christmas, months before launching anywhere else, and has also acquired 8 million more in India, there are 20 million unclaimed subscriptions. These will be split between the eight European nations, but would also include US subscribers acquired post December 31.

We’re unlikely to find out these numbers in the immediate future, but it would be very beneficial to find out which of the partnerships in Europe are working better than others.

Nokia reveals impact of COVID-19 on network traffic

The Deepfield analytics team of networking vendor Nokia has been having a look at how network traffic evolved over March.

It comes as no surprise to see that video conferencing traffic went through the roof, with some US networks experiencing 700% growth in use of the app Zoom alone. Zoom has come under massively increased scrutiny as a result and is consequently having to raise its game. It’s also interesting to see how much more popular it is, especially at the weekends, than Skype, which had been presumed to be the default off-the-shelf video conferencing choice.

The other main source of network traffic is subscription video on demand. Apparently Disney+ already accounts for 8% of all SVoD traffic in some European networks and is maintaining a higher bitrate than the incumbents thanks to the use of six different content delivery networks. As you can see there is increasingly a spike in SVoD demand in the middle of the day that rivals the traditional evening one.

“Traffic increases continue across all regions, and networks seem to be handling these increases well,” conclude the blog. “However, as mentioned before, we are seeing additional demand placed on specific domains (peering, edge routing). Also, there is a need for the cloud-based infrastructure to scale up to support this increased demand.”

Disney set to capitalise on self-isolation with streaming launch

With millions of parents and children scratching the walls searching for something to do, the launch of Disney+ today (March 24) couldn’t have been timed better.

Having launched in the US to much fanfare, subscriptions shot through the roof. During the earnings call in February, Walt Disney CEO Bob Iger boasted of 26 million sign-ups in the first six weeks to December 31, a rip-roaring debut for the Disney+ streaming assault, and it could be looking at another very successful campaign in Europe.

“In essence, this is a great time to be launching a new sought-after service in Europe,” said industry analyst Paolo Pescatore of PP Foresight. “I am expecting to see subscriptions to the annual service surge in the run up to launch.”

According to Pescatore, the challenge which Walt Disney will face is sustaining growth as the scene has been set for a very successful launch in the European markets. This relies on more than timing, as Disney+ will have to prove it can match up to rivals on user experience, content and performance.

Today, Disney+ will launch in several markets across Europe including the UK, France, Germany, Spain, Ireland and Switzerland, while services are planned in Belgium, Denmark, Finland, Norway and Sweden during mid-2020. That said, Walt Disney already brought the March 24 launch forward by a week and it would be tempted to do so in other markets.

COVID-19 does of course present significant problems to numerous businesses and individuals, but there are opportunities.

Microsoft, Visa, Mastercard, Ocado and Amazon are all companies who are benefiting from the circumstances, and Walt Disney could also. The majority of children will be at home for the foreseeable future, as will parents who will hopefully be attempting to do some work. It might be tempting to spend £5.99 a month to provide some more distractions. Not exactly parenting 101, but needs must occasionally.

It has the brand recognition, the contextual advantage and the right pricing point. This could be the challenge to Netflix which many have promised but failed to deliver on. And perhaps most importantly, it has the partnerships in place.

Pescatore pointed to the strategy of offering exclusive partnerships in individual markets with various telcos as a very effective way of establishing a subscriber base. The promotions being offered are of course an excellent way to gather momentum, though it is also the existing billing relationship which is incredibly valuable. Netflix faced sign-up challenges in the early years of international expansion, but Disney has learned these lessons, signing up local partners from the off.

In France, Disney has inked an agreement with Canal+, Deutsche Telekom will be the exclusive distributor in Germany, while Telefonica has bagged the rights in Spain. The UK is an interesting one, with Sky becoming the official partner from a fixed perspective and O2 for mobile.

“The big question is whether O2 can capitalise on the exclusivity of selling to its customers; the jury is still out,” said Pescatore.

O2 will have to go toe-to-toe with Sky to take full advantage of the partnership with Disney, which presents two problems. Disney has allowed Sky to embed its services in its existing platform, alongside its own content and Netflix, which is an attractive proposition. And secondly, O2 has cultivated its image as a ‘pure-play’ telco, only focusing on mobile; this messaging will have to change.

This is a good start in the turnaround for O2. The Disney partnership will add credibility to the telcos image as a service provider, as opposed to a commoditised, mobile-only telco. This business model is doomed to failure, though adding Disney in is an incremental step in the turnaround.

O2 has the foundations of a multi-service telco thanks to its heritage with Priority Moments though this scheme is a shell of its former self as the telcos placed the wrong bets on the convergence trends. However, it has the customer base, an existing loyalty platform and a new partnership with Disney+ to drive forward to bigger and better things.

O2 bags the Disney+ edge in the UK

Following on from its sister brand in Spain, O2 has announced a partnership with Disney+ to become the official mobile distributor in the UK.

As Europe edges towards the launch of Disney+, the local partnerships are beginning to add up for the entertainment giant. Netflix has already proven this is an excellent go-to-market strategy when attempted to crack the international markets, and Walt Disney is seemingly making all the right moves to ensure its challenge to the content king has every opportunity to succeed.

“We’re delighted to work with the award-winning mobile network O2 on the UK launch of Disney+, which represents a new chapter in the way Disney delivers our timeless stories to fans,” said Jan Koeppen, President of The Walt Disney Company EMEA.

“We’re delighted to be working with Disney to bring these incredible shows and movies to our customers, demonstrating that there are more reasons than ever to join the UK’s No.1 network,” said Mark Evans, CEO of O2.

Although Disney and Netflix are being positioned as rivals, what is worth noting is that the two will co-exist. Disney programming is not relevant to all of Netflix customer base, and vice-versa. There is of course cross-over, and Disney will erode some of the vast Netflix subscription list, there are of numerous customers who will take both services, or perhaps completely ignore Disney as a proposition.

Launching on March 24, the O2 partnership adds to the existing tie-up with Sky. In both of these partnerships, Disney+ customers will be able to integrate payments for the streaming service into existing bills, leaning on the trust which has already been established with O2 and Sky. Existing O2 customers will also be entitled to a £2 a month discount on connectivity bills as a reward for subscribing for £5.99 a month, while new customers enticed into the O2 family will get the streaming service for free for six months.

“Offering new and upgrading customers a six-month free subscription, worth £36, will act as a strong pull for consumers who are considering their provider choices in the coming months,” said Nick Baker of Uswitch.

Relationships with telcos are proving to be a very popular way to generate traction in a new market, and Walt Disney already knows the benefits of such a strategy.

During the earnings call at the beginning of February, where Walt Disney CEO Bob Iger said the team had collected 26 million subscriptions in the first six weeks, he also stated 20% of these subs could be attributed to the relationship with Verizon. Such relationships with take a bite out of Average revenue per user (ARPU), but the benefits for the long game are much more significant; this is a recurring revenue play after all.

Alongside the O2 and Sky partnership for mobile and fixed services in the UK, Walt Disney has inked an agreement with Canal+ in France, Deutsche Telekom in Germany and Telefonica in Spain. The team also has a tie-up with US airline Delta, giving passengers on selected routes an opportunity to sign up for a 14-day free trial.

Of course, these relationships work both ways. As the connectivity service becomes more and more commoditised, telcos need to search for ways to differentiate their offering for customers. Partnerships with content creators is a useful way to achieve this objective, and we would hope this could act as a catalyst to reinvigorate the flagging Priority loyalty initiative for O2. This was a very useful initiative to make O2 a competitive force, though it has become somewhat muted in recent years.

TIM secures exclusive Disney+ deal in Italy

Telecom Italia has been announced as the exclusive partner for Disney+ in the country, with services set to be launched on March 24.

With the content and connectivity worlds becoming increasingly intertwined, telcos who are not able to offer a TV service within a bundle might look less attractive. This is the theory, which still needs to be genuinely ratified, though bundling content into connectivity packages is certainly not going to do any harm. With Disney+, Telecom Italia (TIM) has found a very attractive partner.

“We are proud that Disney has chosen TIM as its strategic partner in Italy,” said CEO Luigi Gubitosi. “This agreement comes within the strategy adopted by TIM to pursue alliances with major international players in various segments, to offer cutting-edge products and services.

“Adding Disney+ gives a major boost to the strategy of TIMVision as Italy’s leading aggregator of premium content in the Italian TV industry, in a context where convergence between telecommunications and content will play an increasingly key role in the group’s future, thanks to the development of ultrabroadband and 5G.”

Available across all devices, the TIMVision content platform does look to be an attractive proposition. While some telcos have chosen to secure fortunes through owning content rights, TIM has gone the more steadfast, and perhaps more sensible, direction of becoming a content aggregator. In fairness to TIM, it has done a pretty good job in creating a decent offer, one which will only be enhanced by Disney+ content.

Although Disney has been quite quiet over the last few weeks, it did proclaim during the earnings call that Disney+ had secured 28 million subscriptions in the first six weeks. Perhaps more impressive, is these numbers are only representative of the US market.

Outside the US, streaming video on-demand (SVoD) services have been gathering momentum. Uptake has not been on the same aggressive scale everywhere compared to the US, though bundling content packages in with local connectivity service providers has been a successful venture for Netflix to date. Taking these lessons to heart, Disney is targeting Italy with TIM, has partnered with Sky in the UK and Verizon in the US.

Sky grabs lucrative Disney+ partnership in UK

Partnerships are increasingly becoming the new way to do content in the telco world and Sky has landed what could be an attractive deal with Disney+.

With connectivity and content becoming increasingly entwined as the convergence business model becomes the norm, partnerships with the US streaming giants are very valuable assets. Sky has already inked a relationship with Netflix, even going as far as to embed the service in its content platform but adding Disney+ to the mix is another feather in the cap of the UK’s premium content leader.

“We’ve built a strong partnership with Disney over three decades and we’re pleased that our customers in the UK and Ireland can continue to enjoy their world-class content – all in one place on Sky Q,” said Jeremy Darroch, Group CEO at Sky.

“This is a great start to what is set to be another stellar year for Sky – in 2020 we’ll launch new channels and genres, start building Sky Studios Elstree and we’ve got brilliant new and returning originals coming too.”

If the mission is to have all the best content in a single window, Sky is looking like it is doing a very effective job. Sky already has some very attractive content, but with Netflix and Disney+ to bolster the offering, it seems few will be able to compete in a market which is becoming increasingly congested.

“Ultimately, the arrival of another service further fragments the market for consumers,” said Paolo Pescatore of PP Foresight. “There are too many video streaming services chasing too few dosh. It is becoming more important to be able to access all of these and future services on one TV platform. Here lies the killer feature, universal access!”

But while this is a win for Sky, Pescatore still thinks there is opportunity for a mobile player to cash in at some point.

“This partnership suggests an exclusive deal for a UK provider is still up for grabs. Highly likely that a mobile operator will secure this, mirroring Disney’s strategy in the US. Therefore, EE looks to be in prime position given its track record in securing key premium content partnerships. Disney brings the most sought-after breath of premium programming for all genres.”

Over in the US, Disney+ has proven to be an incredibly popular service. During the most recent earnings call for the Walt Disney Company, the team boasted of 26.5 million paid subscriptions, averaging $5.56 a month. These numbers were accurate to December 28, and considering the aggressive expansion plans, we expect these numbers to be considerably higher come the next earnings call in May.

What is always worth remembering is that these partnerships work both ways; Disney has as much, if not more, to gain.

For Sky, Disney adds depth to a content offering which is already market leading. It is a move to consolidate the position and add more stickiness to the service. It also allows Sky to add more value to connectivity offerings. It sounds like Sky is getting a lot, but then you have to consider what the opportunity is for Disney.

Disney has an excellent brand in the UK, though it will struggle to go head-to-head with the trusted proposition which is Netflix. Through this partnership, Disney leans on the existing customer relationships with Sky to gain a direct link, its existing billing relationship and exposure through an embedded tab on the platform. These elements, plus the marketing dollars which Sky will push towards the launch, will give Disney the best possible start in the UK.

Disney looks like a genuine Netflix contender

Disney’s streaming service is off to a flier as the team boasts of 28.6 million paid subscribers during the latest earnings call. Could this be the genuine Netflix challenger the industry has been promising?

Amazon Prime, HBO, YouTube and countless others have promised to lodge a challenge to the market dominance of Netflix, but few can say they come close. Netflix is still by far and away the leader in the market, but the early signs from the first three months of Disney+ suggest it could be the most likely contender to challenge for the title.

“While this seems to be a good start, it is still early days,” said Paolo Pescatore, founder of PP Foresight and Telecoms.com Podcast number one fanboy.

“The service is starting from scratch. Flagship programming has helped drive awareness and subscriber uptake. Disney will certainly be able to maintain this is the short to medium term, but it still has a long way to go before it is a true challenger to Netflix which is the global paid streaming service leader.”

One takeaway from this early success is that Disney seems to have priced the subscription correctly. The numbers speak for themselves, though the team believes the service will break even between 60-90 million subscribers. This might not account for additional marketing activities or increased spend on original, localised content, but it is a useful milestone to bear in mind.

Interestingly enough, the team expects the immediate gains to be in the international markets.

“In the near-term, we expect subscriber growth to come primarily from outside the US, with the next meaningful phase of domestic subscriber growth likely to coincide with the release later this calendar year of highly anticipated original content, including episodic series from Marvel and Season 2 of The Mandalorian,” said CFO Christine McCarthy during the Walt Disney Company first quarter earnings call.

While this is the opposite from the way in which Netflix produced success in the early years, it does make sense. Netflix is an incredibly popular brand in the US, entrenched in the lives of the consumers already. Netflix is currently focusing on demonstrating the value of the service to international audiences.

This is where Disney might be able to experience more success in the short-term. In terms of validating the value of the brand, Disney perhaps has an advantage over Netflix in some international markets. Disney is one of the most internationally recognised brands after all and it is a simpler task to acquire first-time customers as opposed to wrestling them away from the iron-like grip of Netflix.

After launching in the US last year, the team hoovered up more than 1 million paying subscribers in the first day. Since then the service has been launched in Canada, the Netherlands, Australia, New Zealand and Puerto Rico. Disney+ will make its debut in various European markets over the next few months.

The international markets, aside from a couple, are not as enthusiastic for paid streaming services as the US, so there will be a lot of marketing to demonstrate the value of the proposition. As CEO Bob Igor has pointed out, Netflix has begun seeding these markets with the value of streaming, but it will not be as easy to pry open wallets as it will be in the US.

While the Disney brand certainly holds credibility in the eyes of the international consumer, partnerships will play a vital role in securing subscriptions. The tie-up with Verizon is working well in the US according to the management team (20% of subscriptions are linked to this partnership) and connecting with Canal Plus in France should also be viewed as a positive. In the UK, rumours have been circulating surrounding a partnership between Disney and Sky, which would be a significant win for both parties.

For Disney, bundling the service with the most successful paid TV brand in the country and a prominent ISP makes sense. It is a direct link to the consumer, through an established brand which already has a billing relationship. For Sky, if it is able to embed the service in its interface (as it has done with Netflix), the proposition looks attractive as an aggregator to the consumer, building on its reputation for providing a high-quality content experience.

India is a market which is also on the horizon, with the team launching the service through its Hotstar service on March 29. This is a massive market for any content business, thanks to a significant population and a huge appetite for video content. Disney already has existing operations and a link to the consumer in India, so this could turn out to be a very profitable market, one which few US companies have had genuine success in.

These partnerships will be key to success, key to prying open the wallet of cash-conscious consumers and key to eroding the influence of Netflix on the subscription streaming market. It is certainly early days for the Disney streaming brand, but all indicators are green right now.

Disney+ to launch March 24 in Europe

Disney will be entering the European streaming wars on March 24 will an offer which undercuts industry leader Netflix.

Launching a week earlier than initially forecast is an interesting bit of news, but ultimately it doesn’t necessarily mean anything material. Plans might be moving a bit quicker than expected or it could just be a ploy to attract more headlines. That said, the beginning of the streaming wars is now one week closer than we originally thought.

Interestingly enough, Disney+ will come into the market noticeably cheaper than its rivals. At 5.99/€6.99 a month, or £59.99/€69.99 for an annual subscription, Disney will undercut Netflix currently charges UK subscribers £8.99 a month, while Amazon Prime is £7.99.

“Let the battle commence,” said Paolo Pescatore of PP Foresight.

“This service ticks all the boxes for households; a broad range of content will be available across numerous devices at an attractive price. However, distribution will be important, and Disney must secure deals with partners including telcos.”

While the variety, quantity and quality of the content will ultimately decide who gains an upper hand in the streaming wars, pricing will obviously play a key role. Disney has decided on an intriguing price-point, as undercutting Netflix by a couple of quid perhaps tempts users into a trial period for the service.

This is the challenge which Disney will face over the coming months; stealing subscriptions off Netflix. The video-on-demand (VoD) market is starting to become very congested and priced at such a point that consumers will have to make decisions. It is becoming too expensive to simply subscribe to everything, but Disney is the cheapest available. It is not inconceivable for consumers to trial Disney+ for a couple of months at £5.99, which allows it to prove value.

Disney+ is an unknown for many customers today. If the objective was to go head-to-head with Netflix from the outset, it would lose; Netflix is a trusted and popular service. Some might elect for Disney+ over Netflix, but not as many as Disney would hope for. Setting the price this low, allows for some to dip their toe into the Disney waters, and a couple of months might be enough to either hold onto them as subscribers, or turn them away from Netflix.

The question which remains is how many services can a household tolerate? There are now three main players (Netflix, Amazon Prime and Disney) which would cost a subscriber £22.97 a month to gain access to all three. Then there is Sky, a dominant player in some markets, Viaplay, HBO, Movistar, TimVision and a host of others. The wallet can only be stretched so far.

As Pescatore notes above, partnerships will be key to gaining leverage in a very competitive market and also a more direct link to the consumers wallet. Telcos offer a trusted service to consumers, and therefore are a logical choice, but Disney is yet to announce deals in Europe. Both Amazon Prime and Netflix have partnerships in place, and this will be a very important aspect of the battleplan should Disney want to capitalise on the momentum it is building in the US.

Looking at Sensor Tower’s estimates for the period leading into Christmas, Disney can be very encouraged. It was the most popular app to be downloaded in the US with 30 million, taking in more than $50 million in revenue in the first 30 days. This would suggest Disney can be a very viable threat to Netflix’s dominance in the SVoD market.

With a recognised catalogue of content, heavy investments into new titles and a brand which is known, and trusted, throughout the world, Disney is starting to look like a genuine threat to Netflix.

2019 app economy: TikTok ran riot as Disney got off to a flier

The older characters in the room might not get the appeal of small(est) screen entertainment, but the app economy is real and generating some serious revenues today.

Although gaming is the most obvious segment of the app economy to act as the poster boy, apps are now spanning the breadth and depths of our daily lives. From healthcare to banking and messaging to shopping, if you can think of it, there is probably an app for it.

With 2019 now firmly in the rear-view mirror, Sensor Tower has completed its analysis of the final quarter and the biggest stories over the course of the 12 months. And starting with the top-line figures, the app economy is booming.

Across the 12 months, Sensor Tower estimates there were a total of 114.9 billion app downloads, a 9.1% year-on-year increase, with Apple’s App Store collecting 30.6 billion at 2.7% growth and the Google Play Store at 84.3 billion with growth rate of 11.7%.

Looking at the breakdown of where users are most interested, three areas dominate as most would have expected. Social media, in which we are going to include the messaging applications, video and gaming.

WhatsApp once again claims the title of most downloaded application throughout the year, though TikTok has completed a whirlwind year by claiming second place. While it is undoubtedly a popular application, there has been plenty of negative press to dissuade people from downloading.

In October, Republican Senator Tom Cotton and Senate Minority Leader Chuck Schumer requested a national security investigation into the app, while the US Army and Navy both banned the use of the device on government-owned devices. To make matters worse, TikTok then had to announce it had fixed a vulnerability which allowed hackers to manipulate user data and reveal personal information.

While all of these incidents tarnish the reputation of the app, it wasn’t enough to stop users downloading. Even for the final quarter, the period where TikTok’s credibility came under the spotlight, it was the second-most downloaded application on the App Store and the third most popular on the Google Play Store.

Another remarkable statistic is India accounted for 45% of the total downloads, while Brazil was the second largest market for TikTok. Revenues for the app are already on the increase, there was a 700% sequential increase for the final quarter, but the remarkable popularity in two of the worlds most attractive developing markets will make this app a very interesting proposition for marketers moving forward.

Looking at the gaming section, Call of Duty publisher Activision demonstrated it is possible to successful take a game from traditional gaming consoles onto mobile. The game led downloads during the final quarter worldwide with 30 million downloads in the US and almost 50 million in Europe.

Gaming will always be the poster boy of the app economy, perhaps because it is the most obvious way revenues are generated through apps. What will be interesting to see over the next couple of months is how many of the traditional gaming titles, those which were designed for gaming consoles, are buoyed by the success of Call of Duty and attempt to crossover.

The final area worth noting from the report is the continued success of video content on mobile, most notably, Disney+.

While there are still questions about the depth of the content library, it cannot compete with the Netflix breadth and depth, the Disney brand and the current assets have produced excellent results after the launch in the fourth quarter. The Disney brand is one of the strongest worldwide therefore there was always going to be good uptake, though it needs to capitalise on this momentum, investing heavily in diversified content, if it is to be a genuine threat to Netflix.

Looking at the downloads, it was the most popular app to be downloaded in the US with 30 million, taking in more than $50 million in revenue in the first 30 days. In Q4, Disney+ accounted for 34% of video content downloads, with Netflix and YouTube tied for second on 11%.

This success was also translated into the revenue share. Sensor Tower estimates Disney claimed 16% of the total revenues across the quarter, just leading Netflix which claimed a 15% share. What should be noted however, Netflix has shifted payment from the app stores and onto online channels.

However, one swallow does not a summer make. We suspect numerous subscribers were downloading the app out of curiosity, therefore a much more telling picture of Disney will be in 12 months’ time. Unless the current content assets are supported by new, and varied, titles, we suspect churn might be considerable. Netflix is still content king for the moment, but Disney could not have gotten off to a better start in its challenge.