Disney's (NYSE:DIS) entry into the world of on-demand streaming has gone pretty smoothly thus far. Some opening-day hiccups aside, Disney+ has met (and perhaps more often outperformed) expectations in the early going. But coming out of the gate fast and demonstrating staying power are two very different things, and Disney+ is entering a new phase of its life.

Disney+ owes its existence to Disney's massive stash of media content, including properties acquired in Disney's merger with 21st Century Fox. But Disney+ also ushered in a more fractured and competitive market in streaming, in which subscription churn seems destined to be the norm and new exclusives are a crucial means of differentiation. Disney+ launched with one marquee original series: The Mandalorian, the first live-action television show ever set in the Star Wars universe. The first season met with success, but it has since wrapped up its first season -- leaving Disney+ without fresh episodes for the first time since its launch.

A couple watches TV

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The Mandalorian matters

There's no doubt that Disney's back-catalog of popular content is a key part of its success story. Nor is there much doubt that streaming's new and more tribal era is robbing services of opportunities to pick up licensed content, making fully owned legacy content of the sort that Disney has even more important.

But, paradoxically, these same trends make licensed content less important in some ways. Disney's huge back-catalog of Disney animated classics, Star Wars films, and Marvel Studios movies gives it an edge in a fractured and tribal streaming market, but it also results in a streaming library that is significantly smaller than Netflix's. Other streaming services on the way, including Comcast's (NASDAQ:CMCSA) Peacock and AT&T's (NYSE:T) HBO Max, will almost certainly mirror Disney's emphasis on existing and fully owned content, leading to smaller and more homogeneous content libraries.

In other words, the death of licensed content prevents services like Netflix from becoming one-stop shops, but the lack of one-stop shops encourages subscription churn. Without one big service to turn to for their content, subscribers will likely jump from service to service more often, many experts have predicted. Other experts predict a return to piracy as users seek out individual titles that they are unwilling to add an entirely new subscription for.

In this context, exclusive content seems less important than new exclusive content -- the kind of stuff that will get loyal fans on board with a new streaming service and keep them there. Star Wars fans can buy (or pirate) copies of the 11 films in the series, but the best way for them to watch new episodes of The Mandalorian is undeniably to subscribe to Disney+. That's particularly important given Disney+'s choice of a weekly release schedule, rather than the full-season dump favored by rival Netflix (NASDAQ:NFLX) for its original series. Subscribers couldn't just binge-watch the whole first season of The Mandalorian -- until recently, of course, when the season wrapped up.

Disney has a lot of impressive-looking original content lined up for its streaming service, including original shows and films that take advantage of popular existing properties like Star Wars and Marvel. But many of these big shows are still a year or more away from reaching viewers. In contrast to tech investor favorite Apple's (NASDAQ:AAPL) Apple TV+, Disney+ launched with an emphasis on existing content and only one real marquee original series (The Mandalorian, of course).

The Mandalorian was a hit: It took the top spot in streaming ratings (unseating Netflix's Stranger Things -- though that series' new season was months old by the time The Mandalorian came along). But the last episode of The Mandalorian was released on December 27. What does this mean for Disney+?

Sans-Mando

Without The Mandalorian, Disney+ is without its big show until fall of 2020 and most likely without any big original streaming series until late summer, when the first of its Marvel series (The Falcon and the Winter Soldier) is scheduled to make it to the platform. That's bad news, because it leaves Disney+ without a marquee show for months on end and makes Disney+ subscriptions ripe for churn. A viewer adding a Hulu subscription in order to watch a movie on that platform might be more likely to offset this by canceling Disney+ than, for example, HBO, which has some popular originals running as of this writing.

There are some good bits of news for Disney+, too, however. Some customers are locked into annual deals -- and some even pre-paid for three years of the service (we don't know how many customers are on these sorts of deals). Conflicts with services like Hulu are made less likely by Disney's bundling option (in addition to Disney+, Disney also controls Hulu and ESPN+). And losing The Mandalorian might not be as devastating now as it would have been in a year or two, by which time HBO Max and Peacock will have debuted and further fractured the market.

So what's actually happening? There's some anecdotal evidence that the end of The Mandalorian's first season has triggered cancellations, but it's hard to say whether or how much that will hurt Disney+ until we get a look at updated subscriber counts (and even then, it will likely be hard to pinpoint the sans-Mandalorian effect on what are all but certain to be growth figures).

But common sense tells us that Disney's lack of original content right now is less than ideal. Though not all original content is created equal -- Apple TV+'s originals don't seem to be winning it an overwhelming number of subscribers, and Netflix's quantity-over-quality push a while back drew some criticism -- it remains true that fresh content becomes a more important means of differentiation in a fractured market. For the time being, it's one that Disney+ lacks.