Disney+ and the value of knowing your customer

On Nov. 12, a new streaming platform entered the market, aiming to dethrone the incumbent—Disney+ is ready to take on Netflix. Since 2015, Disney’s CEO Bob Iger had been planning the launch of the company’s over-the-top service. For a time, the $236 billion empire had been licensing its content to Netflix, but in the streaming wars, that strategy only results in short-term revenues. Owning a popular streaming platform gives the company a different, and more lasting, advantage—customer data. With Disney+, the entertainment giant will not only position itself as a leader in the streaming market, but it will also be able to access a pool of data from the viewers. Information, in today’s world, is more valuable than a slight revenue increase. Knowing the customer—and offering a good product—could give Disney market leadership in a streaming battle that’s getting tougher by the minute.

Disney+ was launched two weeks ago and it was able to sign up 10 million subscribers in just two days. For $6.99 per month, users can access 500 Disney movies, including Marvel and Pixar films, Star Wars, and 7,500 episodes of TV, mostly from its ABC network. The amount and quality of the content remain unrivaled, and the service is also cheaper than its competitors, with Netflix costing $8.99 and Hulu $11.99 without ads (read Disney could very soon become the king of online streaming content.) When Disney decided to get into streaming content, it already had a double advantage—its brand recognition and its fantastic content vault. But still it was not an easy decision. Getting into streaming meant losing licensing dollars—the company left on the table $150 million in revenue after ending the studio’s deal with Netflix,—and had to invest in technology: an estimated $2.6 billion to launch Disney+ with guarantees. In addition, Disney will have to charge up for a content battle with other entertainment giants. However, the decision will be worth the investment in the long-term: Disney won’t lose the streaming war and it will gain insights into its customers to further its successes.

With traditional forms of entertainment like movie theaters, viewers’ tastes were estimated by analyzing, for example, the number of tickets sold. With streaming platforms, data analytics has taken a whole new step, and Disney was missing out. Customer data is as necessary as revenues—one leads to the other. Since the early 2010s, Netflix has become an expert in applying customer data to the production or acquisition of new shows.

In terms of macro-data, the streaming platform can know what kind of shows appeal to different demographics and locations, as well as when viewers are more likely to watch a show. The platform may collect data on whether users finish the entire show and whether they binge-watch it. This information helps streaming companies determine when’s a good time to release a show, what kinds of movies are more likely to succeed, and which ones will be devoured by the audience. As reported by The New York Times, Netflix applied those insights when it decided to produce “House of Cards,” a show that was not picked up by the traditional TV networks. For the Los Gatos-based company, big data was a way to ensure popularity. Until now, Disney lacked that information because it was not selling its content directly to the customer. With a platform of its own, Disney can win the game: customer data means more targeted content and increased revenues.

But in terms of content production, there’s even more interesting data that can be learned by analyzing the viewer’s behavior. Streaming platforms can know when the customer paused the show, whether it skipped a scene, and when the viewer decided to stop watching the movie altogether. Those detailed data points can later be used to model new movies—applying what works and what doesn’t to increase the number of scenes that capture viewers’ attention and delete the ones that demotivate customers. What’s more, studios could also include product placement strategies, knowing when viewers are more likely to pay attention—and at the same time, earning ad dollars. Now that Disney+ has launched, we will definitely see unique Disney content that takes advantage of customer information.

Collecting customer information is clearly one of the key reasons why Bob Iger decided to get into the streaming business. But the fact that Disney cannot lose the streaming wars also weighs in. For one, brand awareness matters. As Iger said in an interview, customers tend to go to the brands they already recognize. With Disney’s acquisition of Marvel, Lucasfilm, Pixar, and National Geographic, that brand awareness will only increase. “There’s a comfort level because you know you’re going to be buying something that you know and trust,” added Iger to explain his confidence on Disney+. Disney has also bought 21st Century Fox for $71.3 billion, becoming the full owner of Hulu—Comcast, owner of NBC, the only other shareholder, has agreed to sell its stake to Disney by 2024. Additionally, Disney owns ESPN+, a sports over-the-top platform with ESPN’s content. Earlier this year, Iger said the company was considering offering discounts for a bundled offer of ESPN+ and Disney+. Hulu is also been considered for a discount.

Users will not be able to subscribe to too many streaming alternatives—HBO, Hulu, Netflix, Amazon, Disney+, Apple TV Plus. They will choose the one that offers the most and best content, the cheapest price and the best bundles. At the moment, students can get a subscription for a bundled offer between Spotify and Hulu. Netflix could do the same with other services. But, in that sense, they simply cannot compete with Disney. The company owns three streaming platforms, which it can offer for a bundled price. It also owns massive amounts of quality content, many aimed at families and children, others targeted at fans who will definitely pay—Star Wars and Marvel, for example.

Disney’s experience with content production, its vast content catalog, and its consistent brand awareness will ensure its survival in the streaming wars. But its access to customer data will help Disney in the long-term and it will level the field with other streaming services in terms of knowing the viewer. Disney+ immediate success in its first week since launch is revealing. Other platforms should fear the platform—few things can overcome content and brand…, besides customer data.

 

Watch this CNBC interview with Bob Iger, explaining Disney+ strategy: