One of the most revolutionary price experiments in entertainment history is being undertaken by Disney next week.
With many movie theaters still shut and consumer attendance weakened by fears over the pandemic, next Friday, September 4th, the House of Mouse will release its big new blockbuster live-action movie, Mulan, direct to — and exclusively on — its subscription streaming service Disney+. Unlike Disney’s recent straight-to-Disney+ premieres of Hamilton and Beyonce’s Black Is King, the Mulan premiere will come at an additional one-time cost to subscribers who already pay $5.99 per month. That cost, for what Disney calls “Premier Access” to Mulan, is $29.99.
This is a bold experiment well out of the norm of pay-per-view moves — but Disney has shown commanding confidence in the commercial power of its product, putting into question why the neighboring music industry is so resistant to similar pricing experiments that could net rights-holders much more revenue.
Since Disney announced Mulan’s $30 price point, arguments have raged over whether the gamble will pay off. Will families deem a living-room blockbuster premiere of sufficient value to hand over new cash? If so, could Disney possibly recoup the estimated $200 million it spent making Mulan, despite entirely skipping a theatrical release? And if that happens, what does it mean for movie theaters in a post-COVID world?
On Disney’s latest earnings call with analysts on August 4th, the company’s CEO Bob Chapek set the scene for the release. Chapek commented that although Mulan was a “one-off” event inspired by the movie’s delayed launch in theaters, he hopes it will provide Disney with learnings for the future. It launched “Premier Access” in order to “try and recapture some of that investment” from the film’s production, Chapek said.
Asked if Disney’s pre-release research suggested the straight-to-your-mom’s-couch release of Mulan was commercially viable, he replied: “All I’ll say about our research is that a ‘Premier Access’ offering not only gets us revenue from the original transaction… but also acts as a fairly large stimulus to sign up for Disney+.”
Chapek, then, believes the experiment’s potential for failure is materially lessened by the fact that it will attract new Disney+ subscribers who will guarantee ongoing, long-term income for Disney. (This view is less arrogant-sounding when you consider that non-Disney+ customers can get their first week of access to the platform for free. So Mulan’s release becomes a blockbuster marketing event for Disney+ trials in itself.)
Forgive me a moment of showboating: I predicted this would happen back in April, in a Rolling Stone column juxtaposing the streaming strategy of Disney+ with that of the record industry. I noted that Disney had already launched an additionally expensive PPV tier for UFC fans who subscribed to sports platform ESPN+. I also questioned whether, when Disney inevitably made a similar pricing move with Disney+, the music industry might “finally be tempted to [create its own] pricier tier, above the base monthly cost of a music-streaming subscription, guaranteeing consumers exclusive access to the biggest new releases.”
The answer to that question remains, firmly, “no.”
Disney of course differs to any major player in music in that it is now both a content distributor and a content creator. It boasts more than 60 million subscribers on Disney+ already, while the music industry is still walled off into distribution (streaming services) and creation (labels and artists). And to the music industry’s credit, Universal Music Group just agreed to pay-gate a run of premium releases on Tencent Music’s platforms in China, suggesting a newly experimental attitude.
But Disney’s unshakeable belief in the value of its own premium media, and its willingness to test the boundaries of consumer spending, remain in stark contrast to the one-note approach of the modern record business.
Take music streaming’s current kings of distribution, Spotify and Apple Music.
Are these two platforms soon going to emulate Disney’s move to add subscriber spend on top of a basic monthly subscription cost? Yes. We can confidently forecast this, due to two recent news stories: 1) Spotify is hiring for a Head of Audiobooks while ramping up its podcast investments; 2) Apple Music is pulling together its paid-for ‘One’ media bundle, offering one monthly consumer cost for multiple subscriptions across Music, News and TV.
In both cases, the blueprint to squeezing more cash out of users is clearly not to “do a Disney” and place a premium value on the most desirable releases from your core content type (i.e. music). Instead, it is to make your core content type merely the “base layer” of a variated content offering: Spotify can offer music, podcasts, and audiobooks; Apple can tout music, news, television. This varied content offering — “music plus more” — can then demand a higher all-in subscription cost.
Now, let’s look at music’s kings of content, the three major record companies. The biggest, Universal Music Group, is plotting an IPO within the next three years, for which global subscriber revenues and the “lifetime subscriber value” of these recurrent customers will be a crucial sell to investors.
Meanwhile, NASDAQ-floated Warner Music Group, in its recent SEC filings, cites research showing that 12% of adults “reported that they are likely to spend more on music streaming due to the COVID-19 pandemic.” WMG adds: “We believe the value proposition that streaming provides to consumers supports premium product initiatives.”
Isn’t the pandemic therefore a perfect opportunity to experiment with music pricing? Namely to restrict access to premium releases for a limited period, whether via a standard paywall for free users or even, as with Mulan, via an additional paywall for paying subscribers?
Some would question the sanity of such decisions less than 15 years after digital piracy decimated global CD revenues. I would remind them that Disney doesn’t seem too worried, despite movie piracy in the United States skyrocketing by 41% as pandemic quarantine began.
There is also more positive evidence for holding a Mulan-type experiment in music: take Taylor Swift’s success with her eight (!) separate physical Deluxe Editions for Number One album Folklore earlier this month — or the fact that BTS’s Dynamite has just become the first track to rack up over 100 million YouTube plays within 24 hours of release. Both suggest that certain music superstars have enough clout to play with premium digital price differentiation around their biggest releases, in order to optimize the commercialization of fandom.
Music-industry charts might not help the impetus to make such changes, as they’re not fully revenue-reflective: Taylor Swift wouldn’t have been awarded any extra “sales” for shifting her more expensive Deluxe Edition albums than she would for selling a standard download, for example. It’s a different tale in the movies, where Box Office rankings means that every dollar wrung from a film’s audience counts.
The killer difference between the record industry’s and Disney’s strategies seems to come down to two crucial areas. First, film audiences have never been handed a reason to feel entitled to (legally) get the biggest new releases for free, which is not the case for music fans growing up with the phenomena of Spotify and YouTube.
The second is that the music industry remains divided between content owners and content distributors. Each side’s agenda is never going to match perfectly, nor allow the kind of commercially courageous experiment now being trialled by Disney. Similar tensions still happen in the movie world — theater owners have called Disney’s Mulan strategy a “fuck you” — but the tectonic plates of influence have forever shifted thanks to Disney+’s runaway success.
As Chapek said of Mulan on his firm’s earnings call, with words that may make major record company investors weep: “[You] can test almost anything when you have your own platform.”
Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.