Do you miss Marvel at the cons?

So recently Tim from The Nerd Room asked the question:  Do you miss Marvel at the big cons lately?  They’ve been conspicuously absent!  What’s going on with this?  Where are they?  What are they up to?

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My approach on this tends to be to put myself in their shoes.  Before we get into the weeds, though, I think it’s worth keeping in mind a couple of different things…

1)    Production and Marketing are two very different departments internally.  I saw this a TON when I worked in the video game industry.  And perhaps rightfully so, you want the production team to focus on making the best possible product, and let the marketing team worry about how to sell it.

2)    We don’t hear nearly as much about this with regards to Marvel as we do about Star Wars – but keep in mind that Disney owns Marvel Studios.  So just as we theorize that sometimes the SW marketing has to be in sync with what the Mouse House wants, don’t we have to imagine the same is true with Marvel Studios?

Ok, that being said – let’s walk down this path…

Disney is clearly putting a lot of money behind their streaming service.  That’s obviously including not only Star Wars, but also the MCU properties.  We’ve already started to hear how these properties are going to be dropping off Netflix potentially at the end of this year.

For a few hours, on Thursday 24th May, 2018, we actually saw Netflix bypass Disney and become the most valuable media company in the world.  On that day, Disney’s market cap was $153 BILLION, and Netflix bypassed them ever so briefly, but then came back below $152B by the final bell.  With Disney and Netflix vying for that top-dog spot, we see how close this race is.  This situation informs us as to the importance, at least in part, about the Disney/21st Century Fox deal.  This only further increases the value of Disney as a media company.
 

Now, it’s not all about market economics in terms of market cap ...or is it?  Let’s go back to the Disney Streaming Service (I can’t wait until it has a better name ;) ).   For this to be any sort of success, it MUST have content.  As much content as possible.  Every little bit they can get.  Competitively, that means they have got to give people a solid reason to subscribe to it ALSO – because let’s face it, people aren’t likely to drop Netflix in place of Disney (at least at first?  And as much as Disney would like that to happen) – so the big hurdle for Disney Marketing is to convince consumers to ALSO shell out another $8-10/month for their service.  That’s a big ask in today’s market. 

Now, the challenge here from a consumer market perspective is that this starts to fragment the offerings in the market.  We already have Netlfix roughly owning the movie streaming market, and Hulu having the lion’s share of TV show streaming (although Netflix has a lot of TV shows as well).  But now we’ll have Disney.  And before long the DC streaming service.  There are other niche players, plus the potential of other networks spawning their own services hoping to grab a piece of the pie.  But today people already hand over $20-30/month for Netflix & Hulu.  Now they may add $10 for Disney ... and then will they also drop another $10 for DC?  Now they’re potentially doubling their monthly spend on streaming services (and for cord-cutters like me, now we’re starting to pay cable TV prices again).  So as the market fragments, these services really have to fight for those monthly fees from subscribers, because before too long, consumers are going to start making choices about which to keep and which to drop.

So if Disney wants to maintain its spot as Top Dog (or Mouse), they’re going to have to offer seriously premium content, and a diverse set of content to boot, in order to compete with the deep library available to Netflix.

Okay, that’s a lot to absorb just to set the stage for hypotheses as to why Marvel has been quiet on the con-front.  Let’s talk about what we know is coming from Marvel Studios. 

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We have a small view into the Marvel roadmap right now, with Captain Marvel, Avengers 4, and Spider-Man due in 2019, and Guardians 3 to round out that trilogy in 2020.  Those will all be box office releases, which will, we’d expect, eventually end up on the Disney streaming service (which all depends on how Disney deals with 2019 movie releases relative to the existing Netflix deal).  Beyond 2020, Black Widow, Black Panther 2, Dr Strange 2, maybe Thor 4.  All-in-all, however, even with the first release of those, Captain Marvel, less than a year away, we’ve heard virtually nothing about any of them.  

Now what about TV shows?  It’s been pretty quiet.  Iron First S02 is confirmed for the end of 2018 (no specific date yet).  That will be a Netflix release.  Daredevil S03 is confirmed for early 2019.  Probably too early for the new service, so let’s also call that a Netflix release.  Punisher S02 is due mid to late 2019.  Jessica Jones S03 is slated for end of 2019 or into 2020.  Now we’re definitely into the Disney Streaming Service time-frame.  Beyond that, there’s potentially (though nothing confirmed) about Luke Cage S03, and the ensemble Defenders S02. 

What you see today is that Marvel (and Disney) have NOT been talking a huge amount about these future properties.  Go back to putting yourself in the shoes of Disney Marketing.  Let’s consider the scenario.

Back in 2012 when Disney inked the deal with Netflix, it was said to really be 3 deals:  Netflix would get rights to stream new Disney movies starting from 2016, Netflix gained rights for direct-to-video films starting in 2017, and then also access to the Disney back-catalog.  All in all, these rights were said to be worth in the realm of $300 million a year.  Another way to look at it is this:  That alone pays for 1-2 MCU movies per year, which those alone could be worth $2-2.5B in revenue.  That’s virtually free money!  So there are literally billions of dollars on the table for Disney here.

Here’s a key data point for you:  The deal is set to expire at the end of 2018.

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It doesn’t look like Disney will immediately pull content come 1 Jan, 2019 – in fact Netflix expects to continue to be able to stream Disney movies through 2019 (although 2019 releases may be in doubt – which means they may not be able to stream Avengers 4 or Star Wars Episode 9) – but beyond that looks unlikely from what both companies have said.  That’s also interesting because it potentially speaks to the timing of Disney’s new service.  But let’s consider what Disney has to think about: Will the Disney Streaming Service bring in at least $300M/year (the value of the Netflix deal)? Let’s look at the quick-n-dirty numbers. 

Let’s assume a subscription fee of $10/month.  That’s 30M subscribers.  Does that sound realistic?  Here are some comparisons.  Netflix is currently at 130 million subscribers worldwide, having added 5M new subscribers in Q2-2018.  On the other end of the spectrum, you may be aware of the CBS “All Access” streaming service (which people wonder if it will survive in the long run); they report having close to 5M subscribers today, with their CEO stating a goal of 8M by 2020.  (FYI: CBS All Access is closing in on being 4 years old, with a price of $5.99US/month).  With that in mind, is it possible for Disney to pull in 30M subscribers?  It’s lofty – that’s 23% of the Netflix base.  Conservatively, it’ll take time for Disney to hit that level – and obviously want to grow well beyond it.  In order to do that, they’re going to have to pull some Netflix subscribers over. 

The Q2 reports by Netflix did show growth, but still missed Wall Street expectations were for 6.2M. Missing their target by that much caused their stock to drop a huge 14% following that news.  This last year for Netflix, they’ve gone from $160 in Aug’17, peaking at $418, and now down to $350.  So while it’s been a huge year for Netflix, missing those numbers caused the market to react, even though they’re still significantly up Y/Y.  However, you start to see the value of the subscriber base as it impacts the market value of these big powerhouses.

So…why has Marvel been absent at the cons?  Look at the money on the table for Disney.  They have the capital to invest in building a service almost without blinking.  Disney has gotten very good at marketing, as we’ve seen with the MCU and Star Wars movies the last couple years.  They know how to trickle things out and build the hype.  We have to imagine Disney Marketing has a MasterPlan™ for how to launch the streaming service and with that make big announcements about properties which will be exclusively available on it – that’s the key messaging which will grow their subscriber base. 

Already many of us nerds are ready to hand over our cash.  We already expect that Star Wars and Marvel movies will move from Netlfix to Disney’s service, so please take our money.  The average consumer, who may not budget as much of their discretionary income towards nerdom as we do, may need more convincing.  To that end, Disney is being very strategic about building any hype around future properties which people may very well automatically think “well, I can catch it on Netflix” – I think we already see some people making the choice to skip the box office and catch it 3-6 months later via streaming.  With so many great movies in these key genres coming out, competition for box-office tickets is growing.  We’ve seen people having to make hard decisions about which movie(s) to see any given month, given the growth of releases.  Years ago, we might talk about the (one) blockbuster movie of the summer.  Now we’re talking about which 3 movies during the summer will be blockbusters.  Competition is fierce, so marketing has to become more and more strategic, as a process.

I know we all want these movies to be about “us” – the fans.  In a way that’s true, because we’re so happy to go buy tickets, buy the blu-rays, and contribute towards their bottom line -we’re a core audience for Disney, and also key influencers; we are very important to the market.  However, in the end, this is a business with billions upon billions of dollars up for grabs.  The Mouse House is poised, with LucasFilm and Marvel Studios specifically, not only to maintain their spot at the top of the dogpile, but to grow their lead.  I think we’re going to continue to see some radio silence from them until, at best, the end of 2018, but probably into 2019.  Some key dates to keep in mind are:

  • Captain Marvel releases March 8, 2019
  • Star Wars Celebration Chicago is April 11-16, 2018
  • Avengers 4 is set to release April 26, 2019 (UK first)
  • The D23 expo is August 23-25, 2019

Spring has some big stuff happening.  That March/April timeframe could be a very good time to start talking about the new Disney service, at least to as a start to the marketing campaign.  D23 then sets the stage to give “more detail” at the end of summer.  Maybe that’s when they start to talk about market details (US, Canada, UK, worldwide), and also announce the monthly cost.  Now this is all predicated on a potential fall launch to the service, which is strictly speculation at this point; however it seems to line up time-wise given that Disney has only said “sometime in 2019” so far.  But this all seems to flow logically so far.     

The last few years we’ve really looked forward to Marvel panels and exhibits at places like San Diego Comic-Con, New York Comic-Con, and the likes.  Now, we’re getting virtual crickets.  Do we miss them?  Absolutely!  But perhaps here you start to see that it’s on purpose, it’s poised for them to make a major shift in their own business because of the billions of dollars up for grabs.  If we’re patient for a few more months, beyond the holidays I think the House of Mouse will start whispering in our ear, we’ll start hearing “leaks” of information about the Disney Streaming Service, announcements will be made at their own events potentially, and the future will start to come into focus.