Five Stories Shed Light on the Future of Disney Plus ($DIS) & Its Flywheel

The future of MCU storytelling flywheel may be on hold, but The Mandalorian merchandising and Marvel content on Disney+ will be successes.

Lots of news about Disney+ over the past two days. What makes it all notable is that, connecting the dots between the stories, a clearer picture of both the emerging promise and the structural risks of Disney Plus' evolving business model emerges.

(1) Investor Day?

In their earnings call with investors, CFO Christine McCarthy promised an "upcoming investor day in a few months":

We're going to give you a full update of the guidance we provided at the original investor day when we do the upcoming investor day in a few months. So, you can expect to hear a fulsome review of the guidance and what we're looking for now because obviously things have gone better than expected and, you know, we are growing into momentum here.

We still do not have an announced date for that investor day.

(2) Mulan PVOD Data

I highly recommend reading The Entertainment Strategy Guy's excellent "The (Not) Definitive Analysis of Disney’s Mulan Experiment", because it is as thorough a breakdown of the available data on Disney's Mulan PVOD experiment (which I wrote about here).

I had predicted earlier this month:

Odds are the changes in PVOD-windowing and COVID-related delays on production will force Disney to make changes to its release schedule for theatrical and Disney+. That will drive higher engagement.

Needless to say, with less than $100MM in revenue to date, the best-case projected revenues of $135MM, and 1.1MM to 1.4MM households estimated to have watched Mulan, and, by implication, mathematically negligible sign-ups to Disney+, we likely will not be seeing another PVOD experiment with a tentpole event.

(3) Black Widow & All of Phase 4 of Disney's MCU Delayed to 2021

Variety reported that:

Disney has postponed the release of fall blockbusters such as Marvel’s “Black Widow,” Steven Spielberg’s “West Side Story” and Kenneth Branagh’s “Death on the Nile” by several months. The results are bad news for the exhibition industry, which is facing fierce headwinds after closing for months due to coronavirus.

The studio has kept the late November release date of Pixar’s “Soul,” surprising some in the industry who had expected the animated family film to either move to a later perch or get released on Disney Plus. The moves set off a cascade of distribution shifts that will upend the theatrical landscape for months. Other Marvel releases, such as “Shang Chi and the Legend of the Ten Rings” and “Eternals” will all debut deeper into 2021.

This means, unlike my fantastically overconfident prediction on Twitter back in August, Black Widow will not be going to PVOD.

(4) WandaVision Trailer

This is the new trailer for WandaVision, which is likely to debut on Disney+ in November (maybe, possibly). Deadline's Anthony D'Alessandro reports:

We hear that the trailer in the 24 hours following its Emmy broadcast netted a massive 53M views online. That is believed to be the highest 24-hour draw online ever for a streaming service’s series ad spot.

“That’s in a league with Avengers and Fast & Furious franchises following a Super Bowl drop in a day,” entertainment social media monitor RelishMix tells Deadline tonight.

The extraordinary demand for the WandaVision trailer emerges after news earlier this week that Falcon and the Winter Soldier will not be released until 2021 (its original release date was supposed to be this month).

The takeaway: Disney+ has pent-up MCU demand to meet, and shows may feed that demand better than tentpole PVOD events.

(5) Disney's The Mandalorian Merchandise Blitz

Later next month, Season 2 of The Mandalorian will be released on Disney+. Graeme McMillan of The Hollywood Reporter reports:

Disney and Lucasfilm will launch a nine-week program of merchandise for the series that debuts new products every seven days, under the branding Mando Mondays.

The first Mando Monday will take place Oct. 26, running through Dec. 21, with the program intended to showcase merchandise including toys, apparel, books, comics, collectibles, and more, including the undefined promise of “digital content.” Reveals will be made each Monday at MandoMondays.com.

In a statement accompanying the announcement, Kareem Daniel, president of consumer products, games and publishing at Disney said, “When The Mandalorian debuted last year on Disney+, the show became an instant phenomenon, with fans of all ages expressing excitement for products related to its iconic characters – particularly the Child. This fall, as the world continues to watch the narrative unfold, we will further bring this unique Star Wars story to life through a must-have selection of toys, books, comics, digital content, and more.”

To mark the unveiling of the nine-week program, pre-orders for select items from the first week of products will open at 1pm Pacific across multiple retailers, including the Hasbro Black Series Credit Collection, new Funko Pop! bobbleheads, and the Lego Star Wars The Child construction set. Items will be available for viewing at the Mando Mondays website.

As part of this, Lego has announced a new Star Wars: The Mandalorian Baby Yoda construction LEGO set.

(6) Connecting the Dots Across Disney+ Headlines

The short of it is, Disney is navigating extraordinary uncertainty created by extraordinary circumstances, so if they have not announced an investor day, there are plenty of good reasons. Christine McCarthy told investors, above, that "things have gone better than expected and, you know, we are growing into momentum here". There is certainly momentum in these headlines, but connecting the dots across headlines, there is not a story of momentum across Disney+.

Disney+ Initiatives With Momentum: The Mandalorian and Merchandising, and WandaVision

I think Season 2 of The Mandalorian will be a hit for Disney+, but the success of its merchandising efforts will be more significant. Why? Because people forget that Season 1 launched without "Baby Yoda" merchandise because the showrunners did not want to ruin the surprise reveal. Disney+ and merchandise are two key prongs to DTC relationships, and Disney's ability to monetize and produce both is a key advantage Disney has over pure play streamers. We will watch this advantage play out in real-time over Christmas.

As for WandaVision, it will now be the first post-Avengers:Endgame Marvel property to make it to market. That is a big deal, and 53MM views in 24 hours reflect how much pent-up market demand there is for post-Avengers:Endgame MCU content. The only question will be where it fits in the post-Kevin Mayer Disney flywheel - WandaVision was scheduled to come after both Black Widow and Falcon and the Winter Soldier: it now comes before both.

How will that change the moving pieces carefully intricate web of stories Kevin Feige has been overseeing? And in turn, how will that impact production schedules and costs?

Disney+ Initiatives With No Momentum: PVOD, Falcon and the Winter Soldier, Black Widow, Phase 4 of the MCU

Looking back on CFO Christine McCarthy's comments to the Bank of America Virtual Media, Communications & Entertainment Conference, it is clear PVOD is a tactic and not the future of theatrical distribution:

We chose to release it this way because the release date, as some people who were following just what was going on with theaters not opening and just shift, shift, shift. We had moved the release date several times. And we believed that that movie – given that there's so little new content out, that movie was done and we wanted to get it out in the public domain. And so, we chose to do it this way because we believed that it was the best way to get to most people for them to enjoy it.

Now, if they already had a Disney+ subscription, they could just purchase the movie. Or if they wanted it, they would have to sign up for a subscription. But that was an additional benefit, I would say. It was not the primary driver. We thought that we could drive the most revenue for us doing it this way. And we did have what we believed was a very – we're pleased with the results that we had over the Labor Day weekend, the four day weekend.

But we're learning a lot through this. It's first time we've ever done one of these. And once again, we're taking the opportunity of COVID to do things we've never done before. And we're taking the opportunity to see if there's better ways of doing things than we had previously done. But once again, it's not something that we're – you shouldn't read anything into what we did with Mulan.

Black Widow is going to be released theatrically because the data pulled by The Entertainment Strategy Guy, and likely internal data at Disney, all suggest that PVOD is no substitute for theatrical revenues.And, because PVOD is no substitute for theatrical revenue, Black Widow seems positioned to launch Phase 4 of the MCU storytelling, and Falcon and the Winter Soldier has also been delayed into 2021, it seems like Phase 4 of the MCU will not launch without these movies and shows first being released.

Disney has not said when The Falcon and the Winter Soldier will be released in 2021, but given the fundamental importance of flywheel storytelling to the MCU (where movies once teased upcoming movies, and now can tease upcoming Disney+ shows) a it is reasonable to expect it will be released after Black Widow.

In sum, the future of MCU storytelling flywheel on Disney+ and in theaters may be on hold, but they will have some nice wins with merchandising and Marvel and Star Wars content for Disney+'s business model in the meantime.