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Why You’ll Be Subscribing to Disney+

Why You’ll Be Subscribing to Disney+

Disney+ launches in November. Here are four reasons why you’ll be a subscriber.

  • A New Platform to Expand Upon Iconic Stories. Disney+ shows will dive deeper into the characters and moments in between blockbuster events, filling in the gaps that movies can’t. Fans will almost have no choice but to stay up to date with the new content, as it will likely impact their favorite film franchises and spawn brand new ones.
  • The Power of Nostalgia and Unparalleled IP. Disney has a flywheel of compelling content leveraging its deep library (Marvel, Star Wars, Pixar, new Fox assets, etc.) and theatrical distribution.
  • Pricing. $7 per month for Disney+ is a great value, especially when compared to Netflix’s most popular $13 plan. Disney doesn’t need to bid for IP like Netflix does since it owns all the IP already. In-house productions will help keep costs down and pricing lower than competitors for now.
  • Sports and Live TV. Eventually adding a discounted sports and live TV bundle will ensure remaining cord-cutters transition to Disney’s ecosystem.

A New Platform to Expand Upon Iconic Stories

The most compelling reason to subscribe will be the quality and existing demand of the content. The whole world is waiting in anticipation of Avengers: Endgame, the finale of more than a decade of blockbuster superhero films. Films are limiting in the nature of their form factor given filmmakers only have 90-120 minutes to tell a story that warrants a $12 trip to the theater.

Fans always want more time to connect with their favorite characters and immerse themselves in extraordinary worlds. Disney now has a platform to give fans more. The flywheel is simple: Disney will develop side characters through TV shows and will turn them into new fan favorites, some of which will eventually warrant new films.

Beyond films, which Pixar, Marvel, and Star Wars are best known for, writers and directors will have a new medium to tell their stories in episodic form. We are already seeing Pixar dip its toe into episodic content with a new show in the Monsters Inc. universe called Monsters At Work which is a workplace comedy that has similarities to hit shows like The Office. This is just one example of new shows that fans of the biggest franchises in the world will be dying to watch.

The power of Disney+ will take franchises like Marvel beyond the silver screen, lifting the business to the next level. Kevin Feige, President of Marvel Studios, can now continuously release content and not risk film fatigue while having films drive people to the TV service and TV shows driving people back to the theaters.

The Power of Nostalgia and Familiar IP

Another advantage Disney+ will have over competitors like Netflix, Amazon Prime and Apple TV+ is the power of nostalgia and familiar IP. It can be hard for people to take the plunge into a new show if they don’t know much about it already. After a few minutes of indecision, many of us retreat to repeat viewings of our favorite shows. Sequels and spin-offs are much easier sells. It’s no coincidence 9 of the 10 highest grossing films of 2018 were based on existing IP or a sequel.

With pre-existing demand for new content related to familiar IP, the streaming service will be able to hit the ground running. Disney’s announced slate of projects coming to the streaming service in November already has clear future hits.

Some analysts seem to think the appeal of Disney+ is on-demand access to the vault of Disney animated classics. While this could be the case right out of the gate, we don’t believe this will be the driver of most subscribers in the long term. The pipeline of new content will keep us paying $7 per month after we’ve watched Lion King for the third time. In other words, It’s not about watching Ironman 2 again, its about new stories to related to Ironman and his villains.

Pricing

At $7 per month or $69.99 per year ($5.83 a month), Disney+ could quickly become the best value streaming service on the market, especially when compared to Netflix’s most popular $13 plan. We don’t expect the price to stay this low forever, as we’ve seen Netflix successfully raise its own prices without material backlash.

One big advantage Disney has over its streaming competitors is they don’t need to compete for IP. Netflix hasn’t yet been able to acquire the likes of Marvel, Star Wars, Pixar and 21st Century Fox, so they have to bid on rights to new shows against big pocketed competitors (Amazon, Apple, Facebook, Google, HBO, Showtime, Hulu, etc). Since Disney practically has a monopoly on culturally relevant IP, they don’t have to enter bidding wars for content that has driven Netflix’s content budget up to $15B+. For example, Netflix had to spend almost $100M to keep Friends on the platform in 2019.

Disney’s in-house productions will help keep costs down and pricing lower than competitors for now.

Sports and Live TV

One of the key reasons consumers cite for not cutting the cord is live sports and TV programming. Disney’s media networks, most notably ESPN and ABC, represent >40% of the company’s revenue and with cord cutting taking a major toll on Disney’s stock over the last few years, there is little doubt Disney will be doing all that they can to defend their most lucrative business segment against this trend.

The beauty of cord cutting is consumers don’t have to pay a premium for hundreds of channels they will never watch. In the next generation content consumption market, consumers will be able to pay for only the “channels” they want. This is bad news for many cable TV channels that survive on the back of ESPN and other popular channels keeping cable alive, but not Disney.

Disney is in a great position to create its own TV bundle with the few channels people actually want: sports, live events, news, etc. Best of all, Disney will likely sell this bundle of sports content, live TV, and Disney+/Hulu for a nice discount that will be hard to compete with.

This is a unique offering because Netflix has said they will likely not get into sports or serious live TV anytime soon. Others have tried but don’t appear to have had major successes with it, given the fragmented nature of the offerings. After the Fox acquisition, Disney also now owns a majority stake in Hulu which has recently been focusing on the launch of its Live TV offering for $45 per month.

While there is plenty of room for multiple winners in the streaming game, Disney will soon have what could be the best all-around entertainment offering on the market.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Themes
5 min. read Show less
Ridesharing Survey Shows Room to Grow and Weak Brand Allegiance

Ridesharing Survey Shows Room to Grow and Weak Brand Allegiance

As we consider the future of transportation and the role that ridesharing will play, we want to better understand how consumers of these services use and think about them. To that end, we recently surveyed 450 US consumers about their ridesharing habits.

Room to Grow

The sheer percentage of people that have ever used ridesharing or related services presents a growth opportunity and a hurdle for Lyft and Uber. One third of respondents had never used ridesharing, 36% don’t have any of the apps on their phone, 81% have never used a meal delivery service, and 85% have never used a bike or scooter sharing service.

Of those that have used ridesharing, 60% have only used it a few times, and only 23% are regular (more than 1x per month) users.

91% of respondents said that they own or have regular access to a car. The way Uber and Lyft will grow to serve their true addressable market is for people to abandon car ownership in favor of habitual use of ridesharing and other services.

Brand

In our note on the dynamics and the future of the ridesharing market, we wrote that, while brand would be an important differentiator between Uber and Lyft, it is not a durable competitive advantage in this business. The reason brand is important is because Uber and Lyft are primarily concerned with earning more of your transportation spend. They do that by creating habitual users, and habitual users are born mostly out of unincentivized brand allegiance. In our survey, we found that 40% of respondents were indifferent between Lyft and Uber, 33% preferred Uber, and 27% preferred Lyft. The slight lean toward Uber most likely reflects its wider reach.

Further, we asked which app(s) users had on their smartphones. 32% had both Uber and Lyft, 23% had just Uber, 10% had just Lyft, and 36% had no ridesharing apps at all. The most common behavior in our sample is to keep both apps on your phone and be indifferent in terms of brand. This manifests itself in price-sensitive users who check both apps before hailing a ride. This is both a problem and an opportunity for Lyft and Uber.

Note that 27% of respondents preferred Lyft’s brand, while only 10% went so far as to make it the only ridesharing app on their phone. We also asked the reason for their brand preference. Comments that preferred Uber were generally about reliability and price, while comments that preferred Lyft cited friendly service, trust, and the negativity surrounding Uber’s brand. However, this shows how fragile of a competitive advantage brand is in ridesharing. If it were a real consideration, more people that preferred Lyft would use that app exclusively. 

Other Insights

  • The primary use cases for hailing a ride are a night out, travel-related transport (to and from airport, or while on vacation/business trip), and general mobility, i.e. replacing trips that would otherwise be in taxis, buses or personal vehicles.
  • Only 10% of respondents have used Lyft or Uber to hire something other than a ridesharing car, such as a bike, scooter, or public transportation. Multimodality is key to getting consumers to think of these companies as mobility platforms, instead of just high-tech cab services. Our survey shows that this transition has not taken place, but there is significant room to capture more trips.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Ridesharing
3 min. read Show less
The State of VR in 2019

The State of VR in 2019

Virtual reality’s mainstream adoption and tremendous impact on humanity is coming. How long it will take and who the winners and losers will be widely disputed, but it’s hard to deny the potential of a tool that has the power of infinite simulation.

That said, predictions of the rise of VR have been too bullish in the near term, and now the hype, especially in the venture world, has largely subsided. Our view of VR becoming a critical piece in the future of work, communication, play, and experience remains unchanged for the long term. In a previous note titled “Is VR Dead or Just Getting Started?” we outlined five reasons to be excited for the next five years of VR. To that end, we want to give an update on some of the important VR developments of 2019.

Before we dive into those updates, we should mention why virtual reality hasn’t taken off as fast as many thought it would two years ago. VR hardware, software, and content simply were not ready for mass adoption and expectations outpaced reality. Top-tier head mounted displays (HMDs) like the Oculus Rift and HTC Vive were expensive and required consumers to own a high powered gaming PC, another expensive piece of equipment. Affordable and accessible HMDs like GearVR and Daydream lacked engaging experiences and had a difficult time retaining users.

While there is still no killer app and VR’s user base is currently still too small for an attractive and sustainable developer ecosystem, the barrier to entry for compelling VR experiences is about to fall this year thanks to some new hardware.

Oculus Quest

If there is one reason why 2019 could be an inflection point for virtual reality, it would be the Oculus Quest, Facebook’s first all-in-one, 6DoF headset. At the surprisingly low price of $399, Quest, reminiscent of the first home game consoles, is poised to be a breakout hit with consumers.

Quest represents the first time virtual reality will be given a chance to go mainstream. Consumers will no longer need to already own or go out and purchase an $800 gaming PC. It will now cost the average consumer $400 instead of $1200+ to have VR experiences that will convert just about anyone into a VR believer. A phrase often repeated in the VR community is “Once you try a compelling 6DoF experience, it’s hard not to fall in love with the new medium and imagine all the possibilities that follow.”

VR’s target market will go from the ceiling of the number of people with a gaming PC to just about anyone with $400. This is a massive development.

Valve Index HMD & Controllers

While Facebook/Oculus is currently taking the approach of making VR accessible to the masses, Valve, creator of the hugely popular PC software distribution platform Steam, is building what could be the “luxury” VR HMD for those with a powerful PC.

We are expecting the Valve Index to be revealed on May 1st and released this June. The Valve Index will likely represent the best of what consumer VR offers on the market today.

The Index is expected to be quite expensive and bundled with Valve Index Controllers, formerly known as the Knuckles controllers, and the long awaited and rumored Half-Life VR game. The new Valve Index controllers could be a major selling point of Valve’s HMD since they drastically improve the ability to naturally interact with virtual objects.

While we don’t expect the Valve Index to makes strides in helping VR’s mainstream adoption, it will likely become the go-to HMD for PCVR enthusiasts for at least the next year.

Oculus Rift S

When the Oculus Rift S was announced at the Game Developers Conference (GDC) last month, VR enthusiasts were left wanting more. While a product would ideally appeal to all markets and demographics, this is rarely possible. Oculus decided to make the necessary tradeoffs to build a “Rift 1.5” that made it easier than ever for regular people to enter the premium PCVR ecosystem without having to spend $600+ on a headset.

The Rift S is more of a replacement for the dated original Rift which launched three years ago and does not represent the next generation of PCVR HMDs that many were expecting. However, the Rift S, at just $399, still represents the best value VR HMD on the market in 2019.

The Downfall of HTC?

HTC has had a rough start to 2019 and it just got much worse with the announcement of the Valve Index. HTC’s advantage was it had a loyal following with hardcore PC gamers and had partnered with Valve for best in class tracking technology. It also was assumed the new Knuckles controllers would be a major selling point for HTC HMDs. All three of these advantages are going away this year.

Now that Valve has entered the game, HTC is in a bad spot. HTC’s followers will likely be converting to the Valve Index and not buying another Vive unless there are some major innovations to stand apart. The Knuckles controllers are also now called Valve Index Controllers and most headsets are transitioning to inside-out tracking which HTC has not yet shown they are very good at. HTC will also not be able to compete against the Oculus Quest with their own weak entry into the standalone VR market, which is the future of VR hardware.

If there is one thing that will save HTC, it will be the company’s focus on the enterprise and arcade markets which are not being as heavily pursued by others. HTC has announced multiple new HMDs that are on the way such as the Vive Cosmos and Vive Pro Eye, but too little is known about them at this point to get excited.

Nintendo Labo VR

Nintendo is finally redipping its toes into the VR world with the Labo VR Kit after its failed attempt in the 1990’s with the Virtual Boy. The Labo VR Kit is a DIY cardboard accessory for the Switch console. It features simple (almost gimmicky) mini games that are designed for younger gamers. While this likely isn’t a threat to more established VR players, it does represent an important step for the VR industry to see yet another big gaming company show they are clearly thinking about VR and how they need to be positioned going forward.

New Experiences

Great software is of course needed to go along with great hardware and there are some new compelling virtual experiences coming this year.

UploadVR put together a list of 52 experiences to look forward to in 2019 but here are a few standouts:

Why 2019 Could Be a Big Year for VR

If we were to sum up 2019 for VR in one word it would be accessibility. And there is little doubt the Oculus Quest will be one of the most important developments for VR in years. For the first time in VR’s history, anybody will have access to the VR experiences that turn skeptics into believers. Up until this year, the only accessible VR was largely lackluster 3 DoF experiences on the Oculus Go, Samsung Gear VR, or a cardboard headset.

A technology wave like this only comes along every few decades. We are lucky to be here for the beginning of it and while we are still likely a few years away from VR becoming a must-have device in everyone’s home, 2019 has been an important year for the virtual reality industry.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making any investment decisions and provided solely for informational purposes. We hold no obligation to update any of our projections and the content on this site should not be relied upon. We express no warranties about any estimates or opinions we make.

Facebook, Microsoft, Virtual Reality
5 min. read Show less