Disney is developing original movies and TV shows for its upcoming streaming platform, Disney Plus, including “Star Wars” and Marvel series. But one of the biggest questions looming over the service ahead of Disney’s investor day on Thursday is how much the company will spend on content.
In a report released on Sunday, UBS analysts anticipated Disney will produce up to 10 original movies and 10 TV shows for Disney Plus within its first year, and will spend $800 million on the content.
“For TV series, press reports have indicated Disney is looking to spend roughly $2.5-3.5M per episode but could increase that budget for certain shows up to ~$10m/ep,” the analysts said. “We expect original movies will be modest in budget ($25-35M per film on average) relative to Disney’s films released theatrically.”
Variety reported in September that the Marvel series will have hefty price tags. The limited series will have six to eight episodes each with big budgets that rival studio productions, according to Variety. The only series that Disney has confirmed is one starring Tom Hiddleston’s Loki.
“Longer term we expect Disney to continue to increase production of original content exclusively for Disney+ to increase the value proposition and manage churn,” UBS analysts said. “Many of these movies/series are already in production (or in some cases complete) and will therefore have a cash impact in FY18/19. In our base case, we estimate ~$400m in content amortization for Disney+ originals in the first year of launch, ramping to $1.5B by 2025.”
For comparison, Barclays analysts estimated in January that Netflix will spend up to $3 billion just on original movies this year. It’s estimated to spend $15 billion total on content this year, up from $12 billion in 2018. HBO spent $1.5 billion on original content in 2018, according to Vanity Fair. And Amazon will spend an estimated $6 billion on original content this year for Prime Video, according to CNBC.
Beyond the budget for original content, Disney will also forgo some licensing revenue.
Disney ended a licensing deal with Netflix this year, and all Disney theatrical releases starting with “Captain Marvel” will eventually make its way to Disney Plus. Disney will also likely pursue the TV rights to classic “Star Wars” movies, which Turner Broadcasting owns through 2024.
“We estimate content licensing represented ~$10B in 2018 for combined Disney – Fox,” the UBS analysts said in Sunday’s report. “This includes $4.0B in film and $6.5B in TV production. Over time we expect all Disney / Fox content will forgo third party licensing as it migrates to Disney+ or Hulu.”
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