Market Insight

Disney's new UK SVOD service is a content ecosystem, not just a video player

December 01, 2015  | Subscribers Only

Jack Kent Jack Kent Director, Media and Advertising

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Disney's new SVoD service, Disneylife, launched in the UK on 23 November 2015. As previously detailed by IHS, the service includes support for Android, iOS and PC platforms. Up to 10 devices and 6 profiles can be registered with the option of tailoring parental controls for each individual profile. 

The service includes both classic and newer titles, which Disney hopes will appeal to parents and children alike. Although most Disney titles are aimed at children, according to Disney; 40% of cinema audiences for Toy Story 3, notionally a children’s film, were from a non-family demographic, while the re-release of The Lion King in 2011 and recent hit Frozen also brought in around 20% non-family audiences.

However, Frozen is one of a handful of key recent titles missing from the service, along with Big Hero 6 and Wreck-It Ralph. Frozen is confirmed to be joining DisneyLife after Christmas in spring 2016, taking more than two years to enter the SVoD window, while Big Hero 6 is still firmly outside the traditional SVoD window. However, not all consumers may be aware of this and the absence of these key titles may leave a few subscribers disappointed. Established SVOD services such as Netflix leverage a cycle of “tent pole” titles to attract customers together with a large catalogue enabling binge viewing to retain them. Arguably, Disney does not have to meet the same demand for binge content, as much of its younger audience is happy to watch the same title many times and is also subject to viewing limits on viewing time imposed by their guardians. However given the comparable price of a new release DVD and the monthly subscription cost of Disneylife (both around £10), having at least one star title would be a significant incentive to potential subscribers.

Currently these key titles are not on any other SVoD platform in the UK either, and Disney will be expecting Christmas to be generate significant retail transactions both on physical media and digitally via iTunes and the Sky Store buy to keep service. 

Disney's focus on supporting the service with a strong mobile app proposition is crucial because this is increasingly where the audience is. According to UK telecoms regulator Ofcom 70% of UK children had access to a tablet at home in 2014 and the UK is the leading European market for app downloads and revenues. Children’s app downloads and revenues are growing quickly; IHS forecasts that globally more than 11bn kids’ apps will be downloaded in 2015.

The children’s app business does face some challenges. The vast majority of app revenues come from in-app purchases, mostly from games using virtual currencies or with few limits on how much a user can spend. Family focused brands such as Disney should look for different ways to monetise their children’s mobile content to avoid any controversy from children racking up large in-app purchase bills. Disney’s offer of one free app download each month is a clear attempt to address this challenge and also enables the company to extend the life of its older premium apps. Disney currently offers more than 125 apps on Apple’s App Store which use a mixture of freemium, paid download and in-app purchase-based business models. DisneyLife will not require further in-app purchases beyond the monthly subscription so it may need to adapt existing games or specifically develop new titles to fit with its subscription service.

Disney’s margins from customers who sign up within the app store will be lower than those from direct online subscriptions. Apple’s standard revenue share for App Store subscriptions and transactions is 30%, compared with the usual 2%-5% share taken by card payment processors. Unlike other music and video subscription services that use application store billing, Disney’s service offers first party content so it doesn’t face the same pressure from having to pay other rights holders. The simple billing and distribution offered by application stores will likely drive enough conversions to offset any lower revenue.

The structuring of the DisneyLife service to shows an understanding of Disney fans' differing viewing habits. Younger children often use tablets and it is on this platform that content targeted to kids can be found in the form of games, music and read-along novelizations. On the PC platform, content is limited to movies and TV shows and clearly arranged to target a slightly older demographic.

The content library and other services should provide enough media to keep an audience, however the £9.99 price tag is still high compared to other services. In 2014 broadcasters spent more on kids content than ever before, with European broadcasters alone investing just under $1bn. Both Amazon and Netflix have acquired significant amounts of existing children’s content and also have invested in their own original programming. Parents may therefore choose to rely on Netflix and Amazon’s increasingly comprehensive kids' libraries, especially since these services also provide more content for adults at a lower price point.  Meanwhile, free videos on YouTube are increasingly becoming a major destination for children, both for legitimate and unofficially uploaded content. This gives parents the option to let kids find their own content on YouTube, which may include Disney titles not on DisneyLife, albeit in a less protected environment.

A specialised kid’s service also means that content seeking adults may need a second service to satisfy their viewing needs. This, combined with a broadband and phone subscription is likely to push the family’s entertainment expenditure to around £45 a month, firmly into bundled pay-tv territory. A comparable Sky package, with Disney, TVE and catch-up content, when paired with broadband will cost around £50 and arguably supplies a better all-round family experience.

Consequently DisneyLife is positioned in a very narrow price band between a budget (£5) Netflix experience and a premium Sky TV subscription. No doubt the added features of the service which include apps, games and books are designed to differentiate and increase value, but until true premium Disney content is featured, the service’s proposition may be risky. Having said this, the launch of a content eco-system to serve a whole family, rather than just a video player, is an innovative and forward looking development in the OTT space. If any brand has the brand power and the deep pockets to make such a venture a success it is Disney, especially when rolled out over multiple markets.

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