Disney expects to sell its upcoming streaming service Disney Plus through tech firms Google, Apple and Amazon, Disney CEO Bob Iger said Tuesday. Of the three, inclusion of Amazon is surprising.
Lots of niche streaming services sell through Amazon’s Prime Video, which makes it easy for people to sign up through their Amazon account. But services have to give up a meaningful cut of the subscription fee to Amazon in exchange.
There had been a debate within Disney about whether it makes sense to partner with Amazon, because while it can help fuel subscriber growth, it essentially outsources the app (and marketing) to Amazon. But Disney has big subscriber goals to hit. “We think it’s important for us to achieve scale relatively quickly,” Iger said on the call.
Disney’s earnings also showed the financial impact of its streaming expansion. Disney’s Direct-to-Consumer segment, which houses Hulu, ESPN+ and Disney+, lost $553 million compared to $168 million a year earlier. That’s partly because Disney is now fully accounting for Hulu’s losses, which in the past it hadn’t. But it also reflects the rising costs of the other two streaming services. Expect those losses to increase when Disney launches Disney+ this fall.
Disney and CEO Bob Iger have been very upfront with Wall Street that in the near term, the company was going to be less profitable as it invested heavily in streaming. Investors have so far shown a willingness to accept those costs. Disney stock was down nearly 4% in after-hours trading, a sign that some investors are nervous.