With so many streaming video on demand services, the key differentiator is content, which means big budgets for the major players. The Walt Disney Co. plans to spend a whopping $33 billion for fiscal year 2022, which began on October 1, 2021, according to the company’s fiscal year 2021 10-K filing with the Securities and Exchange Commission. In fiscal year 2021, the company spent $25 billion. Why the $8 billion increase?
“The increase is driven by higher spend to support our DTC expansion and generally assumes no significant disruptions to production due to COVID-19,” said Disney in their 10-K filing.
Disney is always looking to expand their reach, especially through their direct-to-consumer streaming services. However, the company is not putting all their content focus on Disney+. They are also interested in expanding the reach of their other services – Hulu and ESPN – not just their namesake streaming service. The $33 billion budget includes content sports rights, as well as other content, reports Variety.
Earlier this year, Disney secured a deal with the National Football League. Disney will pay the NFL $2.7 billion a year in exchange for two Super Bowls, six more regular season games, and a playoff game, which will be spread out among Disney-owned ABC, ESPN and ESPN+ networks, according to Bloomberg in March.
In fiscal year 2022, Disney plans to produce 50 titles for theatrical and streaming distribution under the Disney umbrella. They currently produce films through Walt Disney Pictures, Twentieth Century Studios, Marvel, Lucasfilm, Pixar and Searchlight Pictures.
The 50 films does not include the amount of content they’re planning to produce under their General Entertainment Content category. Under this category, they are planning to release 60 unscripted series, 30 comedy series, 25 drama series, 15 docuseries and limited series, 10 animated series, five made-for-TV movies, and possibly more.
Growth is leveling off
Disney+ subscribers grew by 2.1 million between Q3 FY2021 and Q4 FY2021, showing the company’s growth is slowing, according to Seeking Alpha, but this is happening to most SVOD companies. Services like Disney and Netflix can’t exponentially grow their audiences forever. There has to be some leveling off.
As we discussed a few weeks ago, subscriber churn is likely to be higher than normal in 2022 than in previous years as people look to cut costs. Also, there are more choices for SVOD services with newer additions like HBO Max and Peacock. Consumers have to decide how many services they can afford and which services provide them with the content they most want. Could a richer, more robust content library prevent subscribers from leaving Disney+ for other services?
Despite the leveling off of subscriber growth, Disney has much to offer its subscribers, including Disney-produced content, content licensed to Disney from other studios, and its bundled offering which combines Disney+, ESPN+ and Hulu in one super-streaming package. Spending more on content will help the company compete against other SVOD providers, while also accounting for the rising costs due to COVID. The current economy is not ideal for anyone, but we think Disney will ride out the storm, and its solid stable of content will keep subscribers loyal and churn low.