Disney’s next big remake project: itself

Walt Disney used to pack movie theatres. Now it believes it needs to stream entertainment to TVs and phones to stay on top.

Disney must transform itself into a tech company capable for moving nimbly. Picture: Zuma Press

Walt Disney rose to the top of Hollywood on its ability to pack movie theatres and theme parks. Now it is betting that to stay on top, it needs to come to you, by streaming entertainment directly to TVs and phones.

Disney is preparing to launch a service called Disney+ that will, for a monthly fee, stream new and old shows built around its most popular franchises. That means breaking off a lucrative relationship with Netflix and instead competing against the streaming powerhouse.

One thing is already clear: the undertaking requires a whole new set of skills, and a major cultural shake-up. Disney must transform itself from a company in which every movie and theme park ride is produced to perfection to a tech company capable of moving nimbly in a hypercompetitive space.

Disney has given producers approval to make a big-ticket Star Wars spin-off series that will bypass theatres and TV and go ­directly to the service. It is offering bonuses for the services of directors and showrunners to work on the offerings it thinks it needs to lure customers away from Netflix.

And it has told its software developers to dial back other projects to make sure the service can handle millions of subscribers when it launches.

All across Hollywood, movie studios are rethinking their missions. Century-old companies are rushing to compete in the streaming business, convinced that the future of entertainment will require them to pipe programming directly into the home.

If the strategy works, it could pump billions of dollars in subscriber fees into the studios. It remains to be seen whether that will be enough to make up for the revenue lost from cable fees, Netflix payments and — if the strategy keeps people home from the multi­plex — movie tickets.

Disney chief executive Robert Iger has called Disney+ his No 1 priority. He spent $US71.3 billion on 21st Century Fox to boost the number of movies and shows it can offer, has given up hundreds of millions of dollars in Netflix licensing fees to hold on to Disney content for the new service, and has even delayed his own retirement to see it through.

Robert Iger has called Disney+ his No 1 priority. Picture: Shutterstock

Disney franchises such as Star Wars and High School Musical will anchor the monthly subscription service, which will launch in ­November. It aims to take on Netflix in family programming, an area of intense competition among streaming sites.

A cultural shift will be necessary if Disney is to turn itself into a major player in streaming. In years past, John Lasseter, then chief creative officer of Disney’s Pixar Animation unit, would delay a movie’s release until he was satisfied it was the best it could be. Disney theme parks are similarly obsessed.

“But ‘done’ is not a thing in tech,” said one longtime Disney employee who left last year. “It’s like oil and water. Two completely different management philosophies.”

Disney operates ESPN+, a streaming supplement designed to mitigate the sports channel’s declining subscriber numbers, and has assumed majority control of streaming service Hulu.

In November 2015, Disney launched in Britain its first effort at a stand-alone streaming service, called DisneyLife. It offers access to about 400 movies, 6000 songs, 4000 TV episodes and 250 books, initially for about £10 a month. It used the service to cross-promote other products. It hawked new releases with exclusive clips. Subscribers were offered discounts at Disney Stores.

The service failed to catch on with subscribers, even after its monthly fee was cut in half, according to a Bernstein Research analyst report prepared for a rival studio in September.

“In all cases, the results were bleak,” the report found. “It might even be described as a ‘failure’.”

Disney’s new streaming service will take a different approach to content. Unlike the British product, Disney+ will focus more on new programming built around its most popular franchises and will eventually have distribution rights to movies after they leave theatres.

The announcement of the new service kicked off changes across the company. Each studio division has been ordered to produce shows and movies for the service that will be available alongside older fare. A reorganisation followed to prioritise streaming.

Acquisitions have powered Disney’s winning streak at the box office in recent years. The company bought Pixar Animation, Marvel Studios and Lucas­film for a total of about $US16bn. Some recent tech acquisitions, though, have fared poorly. Bets on social gaming company Playdom and online video producer Maker Studios have foundered.

One of the lessons Disney learned in Britain was that subscribers say they want new programming but often just watch the old. Year-old episodes of Hannah Montana are hugely popular on DisneyLife. That nostalgic choice led the studio to green light a series based on its mid-2000s hit franchise High School Musical,which is a key component of the Disney+ launch.

Some programming planned for the service will blend old and new. Besides the Star Wars and High School Musical spin-offs, there will be a new show based on the 2001 hit Monsters, Inc .

Executives at Disney+ have told filmmakers to pitch them midbudget projects in the vein of early 2000s Disney hits such as The Princess Diaries and Freaky Friday, not big-budget franchise movies like Captain Marvel that have dominated Disney’s slate in recent years.

In addition to spending hundreds of millions of dollars to build the Disney+ service, Disney expects to lose about $US150 million ($210m) a year in operating income as it pulls its programming off Netflix.