The MCU’s ability to increase output by 130% and unit performance by 30% stems from the brand’s goodwill the company built over its first films, which led to a constant expansion of its fandom (# of fans * affinity) and the ability to launch new mega-franchises around previously unknown characters, such as Guardians of the Galaxy and Black Panther. MCU affinity subsidized the creation of new IP.

For similar reasons, falling short of anticipated affinity can become expensive quickly. Earlier this year, Disney admitted that its newest theme park attraction, Star Wars: Galaxy’s Edge, had underperformed. Specifically, the company had overpriced admissions to the park, overestimated demand, and opened before Galaxy’s Edge’s second attraction was completed (suggesting they thought one attraction was sufficient). Clearly, audience affinity was lower than Disney estimated. In truth, Disney should probably have prioritized the buildout of The Avengers Campus attractions, which are due in 2020, 2021 and 2023 globally. Similarly, Star Wars toy sales have also dropped significantly since 2015’s The Force Awakens, with even Hasbro’s CEO attributing a disappointing fiscal quarter and year to an overestimation of demand.

And as films, like theme parks, are mostly fixed costs, the results of declining affinity are significant. 2015’s Episode VII grossed $2.07B and delivered a $780MM profit, while 2017’s Episode VIII grossed $1.33B (↓36%, well short of expectations) and netted $418MM (↓46%). 2016’s Star Wars Story: Rogue One pulled in $1.05B gross and $320MM in profit, while 2018’s Star Wars Story: Solo failed to cross $0.4B (↓62%) and lost $77MM. Struggles to build affinity in China have been particularly significant. Despite substantial investments in local marketing, Star Wars just hasn’t taken off. 2015’s Episode VII did $124MM, 2016’s Rogue One achieved $70MM, 2017’s Episode VIII did $43MM, while 2018’s Solo hit only $17MM.

I’ve written previously about the managerial mistakes I think Disney made with Star Wars and why. One of the challenges here is that just as affinity picks up momentum, the reverse affect occurs, too – which I call “accrued disappointment”. Whether it’s a movie, album or book, unit sales in media are typically referendums on prior releases. In 2016, for example, DC boasted about the irrelevance of critical reviews and exit polling after Batman v. Superman (27% Rotten Tomatoes, B CinemaScore) and Suicide Squad (a barely known franchise in the DC universe that also earned a 27% and B) opened to massive $166MM and $134MM grosses. Two years later, DC’s signature film, Justice League (40%, B+), cratered with $93MM despite starring the three most popular DC characters (Batman, Superman and Wonder Woman). We saw a similarly precipitous decline with Fox’s X-Men. Goodwill surrounding 2011’s First Class (86%, B+, $353MM) superpowered 2014’s Days of Future Past (90%, A, with a then-franchise record $748MM). Goodwill around this film then helped float the dreadful Apocalypse in 2016 (47%, A-, but $544MM), which then sunk the even-worse Dark Phoenix (23%, B-, $252MM), which lost $100MM+. Netflix’s Marvel Defenders series, meanwhile, was defeated by the fact that each season was bloated and overlong; eventually, audiences started tuning out.

Notably, the arguments around “accrued disappointment” and “affinity” also speak to the dangers of subverting audience expectations rather than indulging them. At the core of Disney’s Star Wars: Episodes VII-IX, for example, is former hero Luke Skywalker’s disillusionment with the Force, with the entirety of The Force Awakens trying to find Luke after he fled his newfound Jedi Order for ascetic solitude. And when he’s finally confronted in the opening moments of The Last Jedi, he promptly throws away his lightsaber and walks away without saying a word. Later, after rejecting a request to help the Resistance, he says, “You think what? I'm gonna walk out with a laser sword and face down the whole First Order?” This is, of course, the single thing fans want most (and have been waiting for since 1983). And when Luke does face off with the First Order, he turns out to be a force-powered hologram. He wasn’t immune to ATAT blasters, nor faster than Sith aspirant Kylo Ren, but instead performed a Jedi trick. Avengers: Endgame, meanwhile, is very mindful of fans’ wants and expectations. There’s the odd moment of subversion, such as Fat Thor (though he still fights and kicks ass), but the film is mostly about paying back the preceding 21 films. If Avengers: Endgame had been styled as The Last Jedi, Captain America would have tried to pick up Mjölnir, but failed (instead, he picked it up and created the most audience thrilling moment of the film).

A good storyteller must constantly challenge and shift audience expectations – otherwise there’s no surprise. But to subvert, you have to then delight by an equal (if not greater) amount. And the more (or longer) you subvert, the more precarious the execution and the more endangered the affinity.

The Bear Case for Disney Affinity

Regardless, if there’s a bear case for Disney in the years to come, it’s that relative affinity will decline. It’s well known that Disney’s revenues (especially in its motion pictures group) will drop substantially in CY 2020, 2021 and 2022 as compared to 2018 and 2019, but a reduction in affinity would be far more consequential.

While the current heights of the Marvel Cinematic Universe were themselves hard to imagine years ago, it seems likely the future will be more modest. The MCU’s two central characters, Iron Man and Captain America, have exited the franchise. The third lead, Thor, doesn’t have a film due till 2022 (five years after his last). In addition, the franchise’s recent performance was supercharged by the fact that it was the explicit culmination of a 22 film arc. It will take years for Marvel to build equivalent audience investment – and even then, it’ll be attempting to do something again, rather than something never seen before.

In addition, Marvel’s forward slate contains fewer films per year and is comprised of significantly less popular characters and IP. It will be nearly a year after the last film in the “Infinity Saga”, Spider-Man: Far From Home, until another MCU title launches. And this title, 2020’s Black Widow, focuses on one of the least popular of the original Avengers and is set in between films the audience has already seen. It’s then another six months until Marvel releases its next film, The Eternals, which is based on virtually unknown IP. The next title is Shang-Chi and The Legend of the Ten Rings, based on another little-known Marvel superhero, followed by a sequel to Doctor Strange (the lowest performing of Marvel’s last four films that focused on a new MCU character). It’s not until H2 2021, two and a half years after Avengers: Endgame, that a major sequel with a large fandom is released (Thor: Love and Thunder). And not for nothing, the DC universe seems to have finally hit its stride after years of languishing.

Over the next few years, Star Wars will also transition from having one major film release per year, to having only a single TV series. While Disney has suggested that a temporary pause/reduction in “Star Wars” content is good for the franchise’s overall health, it’s hard to imagine affinity for the IP will grow during this period.

And at Pixar, it looks like the next two to three years will consist of original films, not sequels to existing IP like Toy Story or The Incredibles. This is good in the sense that it allows Disney to generate new IP (and Pixar has done this several times already), but Disney isn’t prepped to exploit it right away. It takes time to build theme park attractions and scale merchandise sales, among other things.

The Bull Case for Disney Affinity

Still, there’s reason for optimism. For one, Disney’s storytelling expertise and existing franchise affinity provides an outsized chance that its original IP and spinoffs will work. Guardians of the Galaxy, for example, proved that Marvel is capable of turnings the most obscure and odd title into a major franchise. It will be hard for The Eternals to replicate this level of success, but the precedent is there. Similarly, Black Panther shows how a successful adaptation of a diverse character such as Shang-Chi might perform.

It’s also worth noting that the Marvel Cinematic Universe itself was built on runner-up IP. Marvel Studios would almost certainly have built around Spider-Man (the most popular comic book character in the world), X-Men, and Fantastic Four (“Marvel’s First Family”) if it had the choice, not then-unknown characters such as Hawkeye, Thor and Black Widow. But it didn’t and built an empire all the same. There’s no better case study on the power of quality storytelling. And to this end, the popularity of Doctor Strange has grown substantially since his 2016 debut.

In addition, there’s the possibility the Disney+ Star Wars TV series, The Mandalorian, becomes a Walking Dead or Game of Thrones-level hit. There’s no reason affinity can’t be built (or build most) via television rather than film. And Disney+ will be making spinoff series for Star Wars, Marvel and Pixar (such as Monsters, Inc.).

More broadly, Disney+ is essentially a toolbox for affinity maximization, rather than just an SVOD service. Through it, Disney will be able to know precisely (and for the first time ever) each of its customers – from which characters and franchises they like, how much, and how often. This will enable Disney to make not just better content decisions, but also to better optimize for individual fan affinity through bespoke upsell and cross-sell promotions. Put another way, Disney+ will allow the company to increase the “attach rate” of ancillary Disney products to the average Disney fan, and grow unit pricing of these additional sales. What’s more, the company will be able to do so without retail/re-sellers/distributors that have historically taken a cut of such transactions, such as Fandango or a travel agency.

But most important is how Disney+ will allow Disney incubate and cultivate fan affinity in new ways. Through series such as WandaVision and Ms. Marvel, the company will be able to grow awareness of and love for lesser-known/beloved characters without needing to release films that need to hit $500MM just to break even. What’s more, a multi-hour series is likely a more effective way to build affection for characters who don’t fit “instantaneously cool architypes” or benefit from pre-existing name recognition. Certainly, it’s hard to do this when these characters are crammed into the margins of much larger films.