Did Disney Really Underestimate Day 1 Demand for Disney+?

~400 words, ~2 reading time

It’s a common refrain. Before release: “New service/game/etc. coming out!” “Lots of pre-orders!” Day 1: “Site is slow and crashing!” “Underestimated demand”, etc.

The question: is it really reasonable for us to conclude that these companies, which are SO GOOD at estimating demand most of the time suddenly suck at it – ON A REGULAR BASIS, even when they have great data about what demand is going to be?

I submit that the best answer is “no”.

A few assumptions that I’m making here: (1) Day 1 demand is unusually high. (2) Setting up temporary servers that you won’t need in the long term is costly. (3) Companies believe that very few customers are going to punish them for poor performance on Day 1.

Put these all together, and you have an obvious interpretation of the situation. Disney+ estimated how many servers they’d need on an ongoing basis, and has that much capacity ready to go. (This follows from #2 above.) Now, they know this isn’t enough for Day 1 (#1 is something they can predict), so that there will be server problems – poor performance, crashing, etc. – on Day 1. But, that’s okay. The company isn’t really going to be worse off (#3). Yeah, there’s some PR that they’ll have to deal with, but that’s okay. They can always pull an EA, and offer people some free stuff (that’s how I got SimCity 4) – maybe put some movies they “didn’t plan to” on the platform, or offer people a free download of a specific movie through Google Play/Amazon Prime/iTunes, as long as they redeem in the next week. The point is that these are manageable, fairly cheap options compared to preventing the problem in the first place.

Now, there’s another possibility as well: it might be that Disney DOESN’T know how much long-term demand they’ll have. BUT, if it is costly to set servers up and then take them down, it might make sense for them to deliberately work UNDER the needed long-term capacity for the first couple days, so that they can get a better idea of what they should do.

Traditionally, manufacturers overproduce a bit – after all, if you run out of your good, customers will often just buy from a competitor that DIDN’T. (So, assumption #3 wasn’t true.) However, in a world of strong intellectual property protections and strong brand loyalty, that concern fades.

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