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FORTUNE.COM // MAY.1.
heroic Alex Honnold
perched untethered on
the rock face, another
climber intoning:
“There’s incremental
advances that happen
in all kinds of things.
But every once in a
while, there’s just this
iconic leap.”
Subtle, it wasn’t.
Disney is taking a me-
ticulously planned leap
itself into the market for
Internet video stream-
ing, simultaneously
offering new products
while forgoing billions
of dollars in revenue by
removing its content
from rival entertainment
platforms like Netflix.
It is easily the boldest
attempt in years by any
established behemoth to
shift its business model
while operating an
enterprise that’s forecast
to bring in $72 billion in
fiscal year 2019.
The particulars wowed
investors, who bid up
Disney’s shares 13% in
the days after the event.
Its new service, Dis-
ney+, debuts Nov. 12 in
the U.S. It will offer the
prodigious libraries of
its Disney, Pixar, Marvel,
Lucasfilm, and National
Geographic brands in
one bundled service
for $7 a month—half
Netflix’s subscription
price—or $70 a year.
And Disney projected
60 million to 90 mil-
lion subscribers in five
years, two-thirds from
outside the U.S. Long-
time Disney CEO Robert
Iger, who unexpectedly
avowed he’ll step down
when his contract expires
in late 2021, bragged that
“no content or technol-
ogy company can rival”
a catalog that includes
Snow White, every Star
Wars movie, and 30 sea-
sons of The Simpsons.
Disney’s move is
bold—and costly. It
will immediately forgo
$2.5 billion in revenue
by removing Disney
content from rival ser-
vices. Todd Juenger, an
analyst with brokerage
Bernstein, reckons the
pain will be bigger. He
estimates the combined
Disney and Fox collect
up to $8 billion annually
from licensing revenue,
including from Netflix,
and that Disney will
eventually say goodbye
to all of it. Juenger also
frets that Disney will suf-
fer by comparison with
Netflix’s constant influx
of new material. “Wedon’t think there will be
any websites dedicated
to ‘What’s new to watch
on Disney+ this week,’ ”
he says.
Disney’s opening pric-
ing gambit was shocking.
Richard Greenfield, an
analyst with indepen-
dent research firm BTIG,
thinks Disney made
a mistake. Given the
discounted annual price,
Greenfield estimates
Disney’s per-user rev-
enue will be about $6.25.
“It’s tough to make
money at that level,” he
concludes.
Cynics assume
Disney’s rock-bottom
price won’t last, and the
company has more than
a few financial levers to
pull in the meantime.
Disney+ is just part of
its new strategy. The Fox
acquisition gives Disney
control of the rapidly
growing Hulu stream-
ing service, which makes
money from ads and
subscriptions, to add
to the similarly ambi-tious streaming service
run by Disney’s ESPN
sports franchise. Disney
also has no plans to stop
collecting non-streaming
revenue from its big-
gest properties, most of
which will continue to
debut in movie theaters.
Everyone watching
the upcoming streaming
fracas understands that
at some point consumer
“subscription fatigue”
will set in. Amazon’s
Prime Video, Apple’s
upcoming Apple+
service, Netflix, and
expected offerings from
Comcast’s NBCUniver-
sal and AT&T-owned
WarnerMedia will all
test the tolerance of the
most avowed binge-
watcher. That’s on top of
cable and satellite bills
for those who haven’t yet
cut the cord.
For its part, Disney
will apply maximum
pressure to ensure its
services are among those
users choose. “There is
no bigger priority for the
Walt Disney Company
going forward,” Ricky
Strauss, head of market-
ing for Disney+, told
investors near the end
of the three-and-a-half-
hour event. The com-
pany, he said, will push
Disney+ in its theme
parks, on its cruises,
across its broadcast
networks, and through
social media and paid
advertising.
After all, the 96-year-
old industry icon has no
intention of attempting
a daring feat without a
safety net.Disney’s share price has
increased fivefold in Robert
Iger’s 14-year tenure.