We publish an extract of “The world platforms – The hegemony of the new media lords”, new essay Luca Balestrieri, professor of Economics and Media Management at Luiss
Before the pandemic, Disney had already planned the transition to online distribution, adding at the end of 2019 the new Disney + streaming platform to the pre-existing ESPN + (subsidiary of the sports channels belonging to the group and one of the major players in cable TV) and Hulu (joint venture between media companies, which it took control of in 2019 thanks to the acquisition of most of Fox’s assets). The strategy envisaged a controlled management of the transition and the declared objectives were aligned with this: Disney + had the task of reaching between 60 and 90 million subscribers by 2024. Covid-19 has overwhelmed any possibility of prudent transition. Two of Disney’s main business areas, film production and theme parks, have been hit hard. The acceleration of cord cutting has shown the medium-term unsustainability of cable or satellite distribution of sports channels, which together with the generalist broadcaster ABC constitute the television heart of the group.
In this context of uncertainty, the market has given a clear indication, with the – unexpected and sensational – exploit of Disney +, which in March 2021 exceeded one hundred million subscribers worldwide, anticipating the achievement of its target by three years. starting, while the group’s streaming set (Disney +, ESPN + and Hulu) at that date reached 137 million subscribers: a result that legitimized the indication of a new target for 2024, that of 300-350 million subscribers scattered all over the planet for all the streaming services of the group, 48 of which 230-260 for Disney + alone .49 The bet on acceleration towards online was strengthened with the decision, in September 2020, to renounce at the theatrical release of the new film Mulan (with the exception of China where the blockade of theatrical distribution due to the lockdown was returning): in the United States and in the countries where Disney + was already available, the film was available on the platform, with an additional rental cost to the subscription. A gamble, for a production costing 200 million dollars. As further confirmation of the irreversibility of the new strategic direction, in October 2020 the group announced a reorganization which, in the coming years, will refocus its activities according to the streaming platform, for which the new audiovisual contents will be designed as a priority.
Disney’s new positioning has implications for the American industry as a whole and, consequently, for the international media scene. The first consequence is that the process of media platformization, through the transformation and reorganization of media companies and their business model, is an irreversible path. It is no longer a question of having a presence in streaming, alongside traditional offer models: now the challenge is to reorganize all the activities and supply chains according to the conversion to a platform. If Disney did it, no one can escape this choice. All other US media companies have quickly aligned themselves with this tear, with very diverse prospects for success.
Disney is of such size as to allow it to dictate the direction to take for the industry, because it entered the 1920s as the largest traditional media company in the world, in terms of turnover (69.6 billion dollars in 2019, and 65, 4 in 2020) and synergistic coverage of the entire sector. He oversees broadcasting with ABC. It is featured in pay-TV with ESPN sports channels, the classic Disney Channel, FX (one of the stars of the golden season of creative seriality) and other channels that help create a package of offers that no cable operator can. afford not to have, whatever the price Disney asks. Its studios produce series, documentaries and children’s programs for America and the world. Above all, Disney in Hollywood has become from the second half of the 1910s a super major, a subject that is in a class of its own. Its strength, throughout its history, is the ability to build storytelling universes to be explored through a transmedia path, with the invention (or appropriation) of complex narrative worlds.
The growth was endogenous in the initial phase – from Mickey Mouse’s first short film (Steamboat Willie, 1928) to the first animated feature film in the history of cinema (Snow White and the Seven Dwarfs, 1937) – and in the creative and economic revival phase of the years Ninety, from The Little Mermaid (1989) to The Lion King (1994). However, it grew further with the acquisition of Lucas Film (2012), which renewed the universe of Disney stories with the Star Wars saga, and of Marvel (2009), which brought a portfolio of comic book characters as a dowry. from icons of mass culture: a superhero universe thanks to which Disney has produced a long series of blockbusters capable of collecting each – such as Avengers: Endgame, released in 2019 – up to the stratospheric figure of 2.8 billion dollars at the world box office . Growth finally became a qualitative leap with the acquisition of 21st Century Fox, which confirmed Disney’s super major status in the Hollywood scenario. In 2019, Disney films grossed $ 11.1 billion at the worldwide box office, with a market share of 26.2%; Adding to this the revenues of the 21st Century Fox films, acquired that same year, Disney grossed 13.1 billion dollars, equal to 31% of the entire planetary box office: almost a third of the cinema revenues of the entire world industry. Given Disney’s size in the film market, its decision to bring new films directly to the streaming platform is a revolution for the industry, set to write new rules for the 1920s.
The reopening of the theaters, at the end of the lockdown, did not turn the clock back to the 1910s, even if Disney films are back in theaters. The contemporaneity between the release in theaters and that on the platform is the new formula: just to give an example, one of the flagship films of 2021, Black Widow with Scarlett Johansson, belonging to the Marvel narrative universe, was released at the same time in the cinema and on Disney +.
Once again, if this is the path chosen by Disney, the others must follow, especially since the other Hollywood majors in recent decades have been one by one incorporated into the media companies that have the industrial and financial center of gravity in cable TV and which are now forced to change their business model and industrial integration scheme: Universal is part of the Comcast group, Paramount of ViacomCbs, Warner is integrated into WarnerMedia, until recently controlled by AT&T. When Warner announced, immediately after the shock caused by Disney’s decision to bring Mulan to North America only on the streaming platform, that his film Wonder Woman 1984 would be released at Christmas 2020 simultaneously in theaters and streaming on HBO Max, the platform of WarnerMedia, the market interpreted the announcement as a decision induced by the pandemic emergency and not as a strategic choice. However, this double release has been confirmed for the entire Warner 2021 production, featuring 17 films including high-budget productions such as The Matrix 4 and the remake of Dune.
To undermine an industrial supply chain that has been interfacing with the consumer through theaters for a hundred years, and at the same time undermining the criterion of film exploitation windows, which provides rigid exclusives to protect the optimization mechanism for extracting value from the product, it is certainly a difficult and in some ways risky choice for media companies, given the uncertainty about the actual possibility of replacing box office revenues with those coming from streaming platforms. It is a decision that highlights how media companies are now fighting for survival.
The phase of the streaming war that opens now is so tough that these companies, converted into platforms, risk cannibalizing the box office, one of the most solid business sectors in the pre-Covid-19 era and in continuous expansion throughout the decade. past. In order to provide valuable content to the competition on the only ground that now matters for the future – the struggle between streaming platforms for world markets – they must sacrifice what until recently was their natural habitat.
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