Good afternoon!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
On Tuesday Disney touted “Taylor Swift: The Eras Tour” as “the most watched music film in Disney+’s history.” But, the numbers are not great: the 3.5-hour movie achieved 4.6 million views and 16.2 million hours watched in its first three days on Disney+. As What’s On Netflix’s Kasey Moore noted on Twitter, the Netflix movie “Damsel” (starring Millie Bobbie Brown, Robin Wright and Angela Bassett) had 35.3 million views in its first three days.
The views for both movies were global and not exclusive to the U.S.. Had they been, Disney would have a good story in Nielsen U.S. streaming ratings (which are measured by minutes): 972 million minutes watched would be over 10x the performance of its animated Pixar movie “Turning Red” for the week ending February 18, 2024. It would be 35x the musical “Hamilton” for that same week. Competitively, it would have more views than Netflix’s top series “Love Is Blind” (907 million minutes) and 2x Netflix’s movie “Lover, Stalker, Killer” (470 million minutes) that same week. And, that would be only for three days of viewing.
Streaming growth is driven by hits and both Swift’s movie and Eras Tour—which pulled in an estimated $1 billion in gross ticket sales in 2023 and through 2024 is expected to exceed $2 billion—have been hits outside of Disney+. But, on Disney+, it seems to have captured a much smaller—though highly engaged— audience base. 4.6 million views is not great optics for megastar Taylor Swift.
Disney reportedly paid more than $75 million to Taylor Swift or almost 30% of what $261.7 million the movie grossed at the box office. Iger had confidently sold this bet to investors on the FY Q1 2024 earnings call: “We know audiences are going to absolutely love the chance to relive the electrifying ‘Taylor Swift: Eras Tour (Taylor’s Version)’ whenever they want on Disney+.” In other words, the $75 million is expected to deliver both engagement—which advertisers especially value— and growth.
But, the initial data from Disney—and new data from Nielsen, Deloitte and Antenna—suggest engagement from cohorts of Taylor Swift fans may be the best outcome for Disney. "The Eras Tour" is one among many streaming options for consumers, despite Taylor Swift's megastar status. As former CEO Bob Chapek—Iger’s successor and predecessor—previously suggested to investors, streaming consumers increasingly need more from a subscription than content because they can increasingly find compelling content elsewhere, like on Tubi, for free.
So what will this $75 million accomplish for Disney shareholders? The short answer is: Not enough.
Key Takeaway
Whatever Disney’s calculus for ROI on its $75 million investment may be for the “Taylor Swift: The Eras Tour” for Disney+, recent research suggests that calculus may be wrong. Gen Z and millenials—crucial audience segments for growth—seem unsentimental for what Disney used to be.
Total words: 1,400
Total time reading: 6 minutes
Nielsen's The Gauge
Nielsen’s most recent “The Gauge” for February 2024—which shows how U.S. audiences spend their time each month watching TV—shows that consumption of Fox’s free ad-supported TV service (FAST) Tubi grew 0.7% to 1.7% in February, or only 0.2% behind Disney+ (1.9% of all consumption). Disney+ grew only 0.1% month-over-month.
Unlike Disney+, Tubi is free. So, unlike Disney+ Tubi does not have recurring monthly revenues from subscribers. Its model effectively lives and dies on its ability to serve advertising to viewers. Disney+ can monetize viewers either through its ad-supported tier ($7.99 per month) or its ad-free Premium tier ($13.99 per month). The Gauge is effectively a measure of consumer engagement on TVs across the U.S., and Tubi is getting more engagement than Disney+.
YouTube is also a free service that gets the most engagement on U.S. TVs with 9.3% of consumption. It had month-over-month growth of 1.4%. So, on the one hand, it should not be surprising that free services—especially YouTube, which has more than 500 hours of content uploaded per minute—are outperforming subscription services in engagement, despite having worse business models (excluding YouTube). But, on the other hand, Disney has been the entertainment juggernaut of Hollywood over the past few decades and Disney+ reaches over 40 million subscribers in the U.S. Even at 60% of the market penetration of Netflix, the Gauge suggests it gets 24% of the engagement (Netflix at 7.8% in February, up 0.5% from January).
Disney+ should have more usage and more engagement. The problem is that free services increasingly drive engagement on TVs, which is the most valuable real estate for advertisers in the U.S. So, the Taylor Swift movie will be a win for Disney, but Tubi’s growth suggests Disney+ needs more content—or as Chapek argued, more perks within the Disney ecosystem—to drive growth.
Deloitte's Annual Report
Deloitte’s Digital Media Trends Report for 2024 presents the uncomfortable question of whether that growth is still possible in the U.S. Its 18th annual report showed consumers expressing a growing resistance to price hikes. Over one-third (36%) of those surveyed said the content available on streaming video services is not worth the price. And nearly half (48%) of respondents say they would cancel their favorite subscription VOD service if monthly prices went up by $5 per month.
Deloitte data and Disney’s data for “Taylor Swift: The Eras Tour” tell a similar story: Library, alone, is not enough to drive growth anymore. It also is not enough to drive price hikes. The implication for Disney management and investors is that the $75 million payment will be recouped over the long-run through user engagement—basically, churn prevention and advertising impressions on the Basic tier—more than it will through subscriber growth. That is not a terrible story.
But, again, “Taylor Swift: The Eras Tour” was a blockbuster in theaters and on tour, but in streaming it seems to be a niche offering for a passionate fanbase that is only accessible on the Disney+ platform. There is an inherent uncertainty looming as to whether consumers will actively seek out and pay for the concert on Disney+ , too.
Antenna
Disney’s initial data release for “Taylor Swift: The Eras Tour” also reflects the three takeaways from Antenna’s recent “State of Subscriptions: Premium SVOD 2024” report:
Growth for the Premium SVOD category has moderated to 10% in 2023;
The churn rates has almost tripled over the four years; and therefore,
“Streaming services are having to work harder for smaller subscriber gains.”
In other words, whatever Disney’s calculus for ROI on its $75 million investment—which was reportedly higher than either Netflix or Universal Pictures (which handled digital/VOD distribution for the film) were willing to spend—there are real market headwinds in the U.S. for recouping that investment.
There are nuances within those headwinds. For example, ”serial churners”, or individuals who have 3+ Cancels of a Premium SVOD Service in the past two years, drive 38% of category Gross Additions and 40% of Cancels. But, the overall takeaway is clear: The appeal of streaming “Taylor Swift: The Eras Tour” seems to have less immediate appeal to streaming consumers than what free services are offering.
The data suggests that only existing Disney consumers seem to care as much for “Taylor Swift: The Eras Tour” as Disney management had assumed broader audiences would. Spending $75 million on Taylor Swift as a bet on growth may be a fundamental misread of streaming’s value to consumers in 2024.
Consumers' Need for More
It has been five years since Iger publicly rejected the need for Netflix-type recommendation algorithms to The Wall Street Journal: “I think if people are clicking on Mickey Mouse, they mostly want Mickey Mouse.” The problem with that quote has always been the logical questions that Iger’s framing raises.
For the consumer who clicks on Mickey Mouse but doesn’t want to watch Mickey Mouse content at the moment, what else will Disney+ have to offer? What else is there for them? Iger’s implicit answer has been Disney’s library of IP and acquired titles like “The Eras Tour”, “Hamilton” and the hit Australian series “Bluey”. With Disney having revised its growth projections tens of millions of subscribers downwards from its last publicly stated projections from 2022—in large part due to the performance of its India business—that answer seems to be insufficient.
Replace “Taylor Swift” with “Mickey Mouse” and therein lies the second problem: If Taylor Swift fans only want Taylor Swift, what is on Disney+ for the moments they don’t want to watch the concert? Mickey Mouse’s brand has become synonymous with Marvel, Star Wars and Pixar. But, Disney’s brand and Taylor Swift’s brand have no previous overlap with consumers. The only other major concert on the platform is “Hamilton”. For the consumer who wants neither Mickey Mouse nor Taylor Swift, there are plenty of options on other platforms and for free.
Deloitte’s report found that 60% of Gen Zs surveyed prefer watching user-generated content videos because they don’t have to spend time searching for what to watch, and 54% of Gen Zs and millennials believe they get better recommendations for TV shows and movies to watch from social media than from streaming video services. These crucial audience segments for growth seem unsentimental for what Disney used to be.
In other words, Disney’s $75 million bet on “Taylor Swift: The Eras Tour” may solve for consumers who want to watch Taylor Swift, but solves for little else that Disney+ target consumers need for themselves. The consumer rationale for a monthly subscription fee simply is not there, and therefore nor is the business rationale.