'Math Doesn't Work' for First-Run Movies to Hit SVOD Services With Theaters Closed: Analyst

Citing speculation over the past few days about whether Disney would send Mulan direct to Disney Plus with theaters shuttered, Greenfield noted the complications of doing so: “Disney Plus is $6.99. It’s really hard to all of a sudden include a movie that you think can do $1.5 billion globally, and you’re going to just put it in a service for $6.99.” If Disney could put a model in place to charge $15-$20, “you’ve got a whole different story.” Disney Plus’ February average revenue per user (APRU) was $5.50, he noted.

Though Netflix has $13 and $16 movie purchase options built into its platform, others don’t have that option, so studios are opting to delay movie releases vs. putting them out over SVOD, Greenfield said.

Another challenge for Disney Plus during this period is consumers’ appetite for fresh content, said Greenfield. Netflix is publishing its top 10 shows every day in each market, and “there’s no doubt that fresh content is what’s driving it,” he said.

That will be a challenge for Disney with its streaming video service that relies heavily on its movie vault, Greenfield said. Disney used to put a movie into pay-TV windows to generate revenue on Netflix, and then ported that strategy to its own service. In the coronavirus period, new movies aren’t coming out, productions have been halted and Disney doesn’t have a stockpile of TV shows to turn to, he said. It does have its stash of family movies to rely on, but “without new fresh content, it does start to get stale pretty fast, especially for anyone over the age of 15.”

More broadly, multiple streaming brands can survive in the connected TV world, said Luma Partners analyst Terry Kawaja on the webcast. “But it is a war,” he said of the current TV content landscape, “and wars have casualties.” The current streaming war already has claimed victims and more will come because there’s “too much fragmentation,” said Kawaja: “There’s not enough room in the wallet for consumers to consume endless numbers of subscription packages.”

Basic cable TV package ARPU is around $100, said Kawaja, saying SVOD ARPU will be much lower than the average linear TV package. Luma believes in the advertising VOD model, despite the fanfare associated with SVOD streaming services that have launched in the past six months. He cited NBC’s launch of Peacock, calling it primarily an advertising-based VOD service.

Though the TV industry talks about streaming war winners and losers, Greenfield thinks most of the streaming services will be winners: “People are going to take Netflix, Hulu, Amazon Prime.” In some cases consumers aren’t paying for the service, he said, noting Amazon’s bundling of Prime Video in the Prime membership. When iPhone customers buy a new phone, "you’re not signing up for Apple TV Plus incrementally.”

The shift to on-demand TV is “unstoppable,” Greenfield said, and that will be boosted by the COVID-19 effect with people watching more TV because they’re stuck inside. Over the past few days, time spent watching TV is up double digits, he noted, citing a Tuesday Verizon report saying video streaming over its networks jumped 12% since February and overall web traffic by just under 20%. Gaming usage over Verizon networks spiked 75% week over week, it said.

Commenting on whether technology companies intend to “destroy the legacy TV ecosystem,” Greenfield said that would require companies like Apple and Amazon to “make very big bets on sports programming.” So far, that hasn’t happened, he said, noting NFL contracts will expire in two years: “Imagine if you could get NFL Network as an add-on to Amazon Prime; that would be really interesting."