How Disney+ Is Using International Content To Reduce Subscriber Churn
Ever since Disney+ launched, we’ve seen the streaming service spending millions of dollars creating localised original programming around the world, with hit drama series like “Rivals” from the UK, “Artful Dodger” in Australia and “Moving” in Korea, along with a variety of anime in Japan and much more.
During the boom of the streaming wars, Disney was continuing to invest in more original programming across Asia/Pacific, Latin America and Europe, but for a while, it looked like the company was cutting back on their international plans, instead looking to licensing to fill the streaming service with localised content.
But that looks to be changing, as Disney is looking to invest even more in local originals. During a special question-and-answer session at the Goldman Sachs Communacopia + Technology Conference, Disney’s Senior Executive Vice President & Chief Financial Officer, Hugh Johnston, was asked about the company’s plans for international originals moving forward and their investments into them, to which Hugh said:
As you might expect, we are super rigorous around how we make these investments. The one place that we do see an opportunity to invest in content is in TV streaming because that actually provides better continuity and it tends to lower churn and increase engagement just because of the length and sort of the timeline over which TV series tend to get dropped. So we do expect to do more in that. Specifically international as an opportunity. As I mentioned, penetration is a significant opportunity for us. In international, the dynamic is kind of interesting. When we have a tentpole release, our international business pops in a fairly significant way. But people stay for the movie, they watch some of the earlier sequels, and then they tend to churn out until there is a new release, and then they come back in again.
What we are really trying to do with this investment in international content is essentially fill the valleys between the tentpoles and to be able to sort of keep that engagement over time. Now we will do that with international TV shows. We will do it to some degree internationally with sports as well because that is another way to keep people in the franchise. The way that we tend to think about it is you need one objector in the household. So it could be mom, dad, kids, somebody in the household, maybe grandma. But someone in the household objects and then you do not get the churn. If you remember a few years ago, we talked about the fact that we were not ready to invest in international content because we did not feel like the product was ready, particularly the recommendation engines.
He continued to explain why international original content is important to their streaming business:
If we invested in content, we were worried about people churning out because they weren’t seeing enough recommendations that were interesting to them. That’s where we’ve made a significant pivot and we do feel like the product is very much ready, so it’s worthwhile investing in right now and we’re very optimistic about it. We’re going to be smart about it. We’re picking markets, we’re picking types of local content. We’ll do it through licensing, we’ll do it through producing our own. We’re going to take a variety of approaches and then as we see the ROIs, we’ll learn and we’ll continue to focus the investment in a way that will actually work.
Now the one thing to keep in mind is that international content is a relatively small piece of our overall spend right now, and I would expect it to go up by a lot on a percentage basis, but it won’t be disruptive to the overall algorithm of the business. In terms of the big tent poles right now, we really feel like we’re spending enough in terms of the films in particular. A few years ago, Disney had some challenges in that regard by overproducing and frankly, the outcomes weren’t great. We won’t repeat that. We feel like we’re in about the right spot with that.
It’s this targeted area where we feel like there’s going to be a very good return, and we’ve got some early evidence on it in terms of shows in the U.K., in terms of shows in Korea that are returning really nicely right now. We’re very optimistic about that.
These comments from Hugh highlight how Disney’s strategy has shifted; their initial plan was to greenlight so many different things, often without delivering the best products, and audiences just didn’t bother watching them. This seems to be an issue Disney has been trying to fix across its studios by focusing on quality over quantity, and we’re now seeing the benefits of those choices in the international originals.
The big tentpole releases from Marvel, Star Wars and Hulu will continue to be the main bread and butter of the platform, but throwing in some international originals is a great way of offering different types of content, which, as Hugh mentions, they need to appeal to everyone in the family, as that drastically reduces the churn rate.
Personally, I think Disney has overdone its licensing in the UK, as Disney+ often feels like a carbon copy of ITVX, with dozens of older British shows appearing on the homepage rather than the latest originals from Disney’s own studios. Hopefully, with a better personalisation system in place on the homepage, this won’t be such a problem moving forward as the platform evolves.
I certainly think Disney needs to actually be investing much more in animation, not just anime, from around the world, as this is one of Disney’s strongest formats and is much better at travelling, due to dubbing. But it’s also clear Disney is being much more picky about what it’s investing its money in, often teaming up with well-known local celebrities to reach a wider audience.
What do you think of Disney’s plans for international originals? Let me know on social media!
