“Black Panther: Wakanda Forever” advanced ticket sales passed $45 million in the U.S., with expectations for much higher numbers when it opens this weekend. At the same time, Disney’s stock slumped after its head, Bob Chapek, reported in a Q4 call meager earnings and missed estimates this week. Though Disney+ added 12 million subscribers, streaming has proven to be expensive to maintain and challenging to plan profit outlook.
Kim Masters and Matt Belloni look into what those numbers mean for Disney. Plus Warner Bros. Discovery wants to make a new “Harry Potter” movie, but faces financial and logistical challenges of its own.
This conversation has been edited for concision and clarity.
Can Disney be profitable again?
Kim Masters: Certainly Disney lost … over $1 billion in the quarter on [streaming]. Streaming is really expensive, and I don't think anybody has figured out how to make it work, where you don't lose money. Chapek said this is [a] big loss, and after that it's not going to be the same, and, “We're going to be profitable fairly soon.” But I'm not sure how attainable that is.
Matt Belloni: You're not alone. The market is certainly not sure how attainable that is because the stock dropped 10% on this earnings, and Chapek has set a very aggressive goal. He said that Disney+ will be profitable by the end of 2024. That's not that far away. It's two years from now.
Disney is walking on a tightrope
Belloni: They've got a big deficit there to contend with because they've sunk more than $8 billion into this streaming service now, and they have not gotten the return on that. And the revenue per user of these subscribers is extremely low compared to the competitors that they're in this business with.
There's many reasons for that. They have all these subscribers in India that don't pay very much. Bob Iger priced the service very low in order to get market share very quickly because that's what the stock market was valuing at the time. There's been a complete about-face on that. Now they're looking at profitability, and Disney is stuck here with tons of subs, but people [are] not paying very much.
That's going to change in the U.S. very soon because they are raising the price of Disney+. It's going from $8 to $11, if you don't want advertising with it. They think that the people who stay at that $8 price and want to take the ads are [going to] give them another revenue stream, which can hopefully help this service get to profitability.
But it is a tightrope they are walking [on]. At least, for right now, the market does not seem to believe that Chapek is going to get to that other side by 2024.
Masters: It is indeed a tightrope that any legacy media company, with a streaming service is walking. The old businesses that threw off money are fading, like broadcast networks, and in many cases, theatrical windows. Meanwhile this streaming thing is not really paying, and it's really expensive to keep coming up with those original programs that keep people from turning out.
Problem not exclusive of Disney
Masters: This is a problem that also afflicts Warner Bros. Discovery. They also reported earnings. Their stock has been so low. That company is just strapped with debt and in a very difficult time when this transformation is happening. The old stuff is fading and the new stuff [is not] paying, but it's actually leading to losses.
Daniel Radcliffe, Emma Watson and Rupert Grint appear on a poster of the Wizarding World of “Harry Potter” experience in Madrid, Spain on November 22, 2017. Photo by Anton Ivanov/Shutterstock.
Zaslav wants another “Harry Potter” movie
Masters: I was struck when David Zaslav, the head of Warner Bros. Discovery talked about, “We want to do another ‘Harry Potter’ movie.” He's putting a lot of emphasis on wanting to do theatrical and get the benefit of all the windows that you make money off of when you release a movie theatrically.
He mentioned, “I'd love to do one if J.K. Rowling is interested.” That stopped me. He gave some numbers about how long it's been since there [has] been a “Harry Potter” movie, which weren't really correct, and he erased the “Fantastic Beast” movies, which I think did not do anything to help the “Harry Potter” franchise.
Belloni: If you look at the performance of the “Fantastic Beast” movies, I think a lot of people would like to forget them because they are diminishing returns, and this last one was not very good.
J.K. Rowling still controls the franchise
Belloni: But J.K. Rowling has been involved in these movies, so it's kind of weird to gloss over them. This is a very tough situation on “Harry Potter” because yes, if Zaslav could snap his fingers and get a new “Harry Potter” movie, of course they would do it. It's a huge franchise. But Rowling is still alive and has a huge say and control over what happens to these characters, and if she doesn’t want to do it, she doesn’t want to do it.
Masters: She's very controversial. Her views [on] whether trans people are really trans – she cannot get off that hobbyhorse, so, right away there's baggage, in addition to whatever was diminished by the “Fantastic Beasts” stuff.
A little too soon to reboot it?
Masters: Eventually you would want to reboot “Harry Potter,” but maybe it's just a little too soon, and it feels to me the kind of idea that someone who is not necessarily of Hollywood – Zaslav is from Discovery but not of this part of the business – thinks it sounds great. Maybe [it is] a little more complicated than he imagines.
Belloni: Absolutely. I think he's just looking at the balance sheet and saying, “Oh, DC movies do X, ‘Harry Potter’ movies do X, and everything else does a lot less than X, so let's do more of X.
Masters: Yes, let's do more of X, but it's not so simple.