Look, that is where I have to watch SVU and X-Files now so hang on…
Disney jumped on the streaming service bandwagon, but is worth it to keep it going?
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SOURCES
https://www.msn.com/en-us/money/companies/disneys-move-to-merge-hulu-into-disney-could-save-company-billions-of-dollars/ar-AA1KaDKP
https://www.forbes.com/sites/greatspeculations/2025/11/18/disneys-200-billion-plot-twist-streaming-the-real-magic/
https://finance.yahoo.com/media-advertising/articles/ditching-streaming-could-boost-disney-121346478.html
https://www.forbes.com/sites/dbloom/2026/07/13/should-disney-get-out-of-streaming-or-double-down-on-distribution/
https://www.cleveland.com/news/2026/07/major-streaming-service-considers-free-ad-supported-plan.html
https://collider.com/disney-plus-free-streaming-tier-update/
https://www.digitaltrends.com/home-theater/most-popular-streaming-services-by-subscribers/
The Marketing Gateway is a weekly podcast hosted by Sean in St. Louis (Sean J. Jordan, President of https://www.researchplan.com/) and featuring guests from the St. Louis area and beyond.
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TRANSCRIPT:
So as I was reading the business news yesterday, I came across an article about a recent report from Wells Fargo analyst Steven Cahall who’s laid out a case for something really crazy.
He argues that Disney, one of the biggest entertainment companies in the world, should get out of the streaming business and shut down Disney+. By doing this, he argues, Disney can return to a focus on producing content and then selling it to its subsidiaries or current competitors through licensing fees. Eliminating the costly streaming model to deliver this content and focusing instead on simply creating it could net Disney over $15 billion in his estimation, adding an extra 10% to earnings per share and potentially boosting it up to 40% over time.
The report includes some outside the box thinking reframing the battlefield in the streaming wars as being about platforms versus producers instead of vertical integrations where the producers control the platforms. Disney, Cahall says, isn’t as good at keeping up with the technology of running a platform, but it’s excellent at production and it has a deep and valuable library. It doesn’t make sense to keep doing something that isn’t a core competency when Disney could be focused instead on letting other streaming platforms like Netflix or YouTube absorb the risk and making money licensing content to them.
This also isn’t the first time Disney has been given advice like this. Disney owns a number of broadcast licenses and the network ABC as well as cable channels like ESPN, and analysts have suggested that maybe it’s time for Disney to get out of broadcasting as well, for similar reasons. This has been exacerbated by the current regulatory climate, by the way, particularly when Disney+ and its sister streaming service Hulu got caught up in boycotts last year due to the suspension of Jimmy Kimmel as the Trump administration put pressure on the Disney-owned ABC to do so after a perceived slight.
I find reports like this fascinating because they challenge the logic of the sunk cost of getting into a business that takes years to grow and develop but which turns out not to be super profitable. Businesses often have a difficult time optimizing their profitability due to their bias towards sticking to long-term strategies and also their momentum, and it can take outside voices like analysts to help introduce alternative viewpoints.
But from a marketing point of view, let’s also ask – what has Disney gotten and given up for its forays into streaming through Disney+, and are they leaving money on the table by tying their brand to a service that’s not their strongsuit?
I’m Sean in St. Louis, and this is the Marketing Gateway.
When I was growing up, Disney had a tremendous pipeline for entertainment products bearing its name – they’d launch movies in theaters to make tens of millions or even hundreds of millions of dollars, then launch those movies in the home video market and often double or triple their profits, then retire those films to build anticipation for their re-release down the road. Every new launch of a film gave them an opportunity to launch or license brand new ancillary merchandise, and they could even keep a good thing going with direct to video products, television shows on their cable channels, attractions in their theme parks and so forth.
When the DVD home video format came out, Disney saw an opportunity to convince consumers to upgrade their VHS tapes to Disney DVDs. And when Blu-Ray came out, Disney once again encouraged consumers to buy the latest and greatest version. This worked pretty well for them up through the 2010s, but something happened to start eroding those sales.
And that something was digital on demand video provided by services like Netflix, Amazon Prime Video, Vudu, YouTube and Hulu. Some of these services focused on selling digital copies of films for rental or to own, some focused on ad-supported content using digital ads mapped to consumer profiles and some focused on all-you-can-eat subscription costs for unlimited viewing, a model we’re very accustomed to today. Many picked two or more of those approaches; Amazon uses all three!
Prior to Disney+, Disney was doing a pretty good job of licensing its content to these services. There was still a lot of Disney content on Netflix’s on-demand streaming service about 10 years ago, and you could also find it scattered across other services. They all had to pay Disney for the license to provide that content and it offered Disney an alternative way of getting its media in front of consumers who were no longer willing to purchase physical media and who wanted it to be available for streaming on demand.
Disney even set up a service called Disney Movies Anywhere that allowed those buying physical copies of their films to register them with a unique code and have access to them through on-demand video services. Disney also owned several different film studios and acquired the 21st Century Fox studio and its IP, giving it a strong footprint for not just selling and distributing its movies and TV shows, but also licensing them to cable providers and streaming services.
At this point, movies were still largely a consumer product. But that all changed as Disney prepared for the launch of Disney+ in November, 2019. The project had been in the works for several years by that point and Disney was keen to compete with CBS owner Paramount Studios, who’d already launched their own service called Paramount+, NBC owners Comcast and NBCUniversal, which planned to launch their own service called Peacock, and Warner Brothers’s then-upcoming service HBO Max.
It seemed to everyone at the time like legacy media was trying to take over the market that Netflix had already cornered, and as we now know, it didn’t work out too well for them. According to a November, 2025 piece by DigitalTrends, Netflix currently has around 300 million subscribers globally. Amazon Prime Video has at least 200 million. Disney+ has around 130 million and its sister service Hulu has around 55 million. HBO Max is similar to Disney+ at 128 million and Paramount+ has around 77 million. Peacock is in the 41 million range and Apple TV, I found elsewhere, is in the 25 million range.
And by the way, in China, you also have iQiyi at around 100 million and Tencent Video at 114 million and the Indian streaming service JioHotstar has around 300 million.
Netflix is the only streaming service that’s doing truly well globally, but we also shouldn’t ignore YouTube, which has 2.7 billion monthly active users and 125 million paid subscribers. And in terms of eyeballs, the MrBeast channel alone has more than most of the smaller streaming services combined, with over 500 million subscribers. And TikTok is the number one mobile video app, in the world with 875 million downloads worldwide.
When you hear these numbers, you start to realize that a brand as big as Disney ought to be doing a lot better than having 130 million subscribers. After all, this is a company that has some of the best-selling home videos of all time, like Aladdin and The Lion King at around 30 million sold on VHS and Finding Nemo at nearly 40 million DVD copies sold and Cars at 23 million sold.
Pixar movies were pretty big sellers in the DVD category, by the way, taking quite a few of the top 25 spots. The Disney animated movie with the highest DVD sales, Frozen, only sold around 15 million copies by comparison, followed by the re-release of The Little Mermaid at 13 and a half million. At least, according to figures published on IMDB!
Disney has another problem as well. Unlike most of its competitors, it produces most of its content directly and then puts it on its platform for subscribers. So when you have a high-profile hit like Star Wars: The Mandalorian in 2020, you don’t make much money off it directly – you have to hope it pushes subscriber numbers up as people join Disney+ to see it.
And when you have a high-profile flop like Star Wars: The Acolyte a few years later, you also can’t gauge how bad of a flop it was the way you can with a film like Star Wars: The Mandalorian and Grogu, which tanked earlier this year as the lowest-performing live action Star Wars theatrical film to date.
That also points to another problem. In Disney’s traditional model, having movies move from the rarified air of the movie theater to home video spurred purchasing, allowing Disney to double-dip on its audiences. In their current model, consumers have been trained to just wait for movies to come to streaming where they cost nothing beyond the monthly subscription fee, which means that consumers don’t feel driven to head to the theaters as often.
That’s one reason why many Disney and Pixar sequels have been massively successful – families show up for more of what they like, and sequels to popular movies have a global appeal – but newer stories don’t tend to fare as well unless they get a lot of buzz like Encanto did.
So Disney is absorbing a lot of the risk and realizing a lot less of the profits by having a poor understanding of the consumer it’s serving. If Disney licensed their content to their current streaming competitors, there would be huge bidding wars for mere slices of their libraries because that content is valuable and evergreen, especially when it hasn’t been available for awhile. And Disney could have complete control over that content they’re already producing and continue to realize its value for years to come.
Streaming services, on the other hand, are an endangered model because the subscription costs are getting too high for consumers and they’re realizing that they don’t need to have all of them – maybe just a bundle of their favorites, like the Disney+, Hulu and ESPN bundle – is good enough. There are also a growing number of free, ad-supported streamers like Pluto TV, Roku Channel, Crackle, Kanopy and Tubi that are good enough for many people if you just want something to put on the screen.
The truth is that every time prices go up, subscriber counts dip. Sometimes they go back up, but often, they remain flat or even decline because the cost increases don’t add any value for the subscribers. There are a finite number of households that will subscribe to paid services, and we’re probably getting pretty close to that ceiling in the Western world.
Recent news also suggests that Disney+ plans to boost its subscriber base by adding a free tier into its service and advertising to users. This strategy has not panned out terribly well for other streamers like Peacock who’ve tried it, and Amazon even wound up adding advertising across the board because the free tiers weren’t paying the bills. Disney may also further reduce costs when it sunsets Hulu and merges it into Disney+, but I can say as a user of both services that Disney+ is actually inferior to Hulu as a streaming app and it’s likely to cause some further drop-off even if the content libraries are merged together.
So, we come back to the question – is this worth Disney staying in the fight, or should they start sunsetting their service and licensing their content?
I honestly think the problem is that Disney needs to decide what business it’s in. It sounds really great in a boardroom to talk about vertical integration to draw a straight line from production to consumer, but the devil’s in the details, and Disney+ is a fairly mediocre service from a company that’s otherwise known for being really great at serving people. It clouds Disney’s judgment since they’re basing production decisions on platform views rather than on naked marketability for growing their IPs and it also encourages them to do less marketing for ideas that might have done well in movie theaters or on home video traditionally since they realize less profit on the streaming platform.
Video streamers also really benefitted from the COVID bump giving people a reason to check them out, but that era is over and we’re now moving into a time where the category is crowded and competitive. Disney getting out of the game and licensing content instead could be a savvy move to allow their competitors to throw money their way while losing them very little in terms of audience, visibility or overall popularity as a brand. They also wouldn’t be responsible for the service delivery – they could let the technology platforms they license their content to worry about that.
The other thing Disney is really missing out on right now is excitement. That was one of their key drivers in the 90s and 2000s for becoming such a major entertainment brand after a big slump in the 80s – they would create something new, make a big deal about it and then reap the rewards. It’s hard to get excited about modern-day Disney as an entertainment brand because they play things so safe and are putting so little effort into merchandising anything but their most popular IPs.
So I think there’s merit to this idea, and it’d help Disney refocus on selling its content rather than a so-so service. I’ll be interested to see what they ultimately do!
I’m Sean in St. Louis, and this has been The Marketing Gateway. See ya next time!
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