As Disney gears up to launch its streaming service, it has a real problem.
The majority of its back catalogue is made up of movies. But the one to two hour format plays badly in the streaming era.
It was the perfect length to sit in a dark room full of strangers munching loudly on smelly popcorn, but at home the box set and short form formats rule.
Your average 5 year old and 40 year old really don’t want to spend two hours watching the same programme.
At $7 the Disney streaming service is a sensibly priced top up option. Cheaper than a single cinema ticket.
If a quarter of all American homes subscribe, that would amount to $224m a month or $2.75bn a year, largely using sunk costs. They could triple this outside the US, so a $10bn business is born.
With operational costs of $200m, delivery (CDN) costs of $260m, plus marketing costs of $200m that leaves $5bn for original programming and content acquisition, about what I estimate the company spends on producing content today.
The House of Mouse needs to spend a lot of that on short form and box sets if it is to succeed in its latest venture.