Shares of Disney popped 8% Friday morning, as investors cheered the Mouse House’s monster-size content flex outlined at its 2020 investor day for stepped-up push to accelerate its global direct-to-consumer streaming offensive.
In early trading, Disney stock was trading at $167.13 per share, pushing the company’s market cap to over $300 billion. Netflix shares were down about 1%, presumably on fears of great competition from Disney.
Amid the torrent of Disney’s news yesterday, it announced 105 movies and TV series, 80% of which are pegged for its direct-to-consumer streaming outlets; said Disney Plus reached nearly 87 million global paid customers as of Dec. 2; massively raised sub forecasts for Disney Plus to 230 million-260 million by September 2024; and outlined the 2021 rollout of Star, a new international entertainment service akin to Hulu that will be integrated with Disney Plus outside the U.S.
Disney also announced price increases for Disney Plus: In the U.S., it will rise by $1 per month, to $7.99 in March 2021, on a standalone basis; in Europe, it’s rising by €2 per month to €8.99 alongside Star’s debut in February.
“While we expected to hear about Disney’s accelerated content investment in their DTC businesses, the sheer size and quality of the content tsunami headed to Disney Plus was mind-blowing and frightening to any sub-scale company thinking about competing in the scripted entertainment space,” MoffettNathanson analyst Michael Nathanson wrote in a Dec. 11 research note.
Among the new content in the Disney Plus pipeline are 10 Star Wars series, 10 Marvel series, and 15 Disney and Pixar Animation coming over the next several years, announced by Kareem Daniel (pictured above), named head of the newly created Disney Media and Entertainment Distribution group two months ago.
“We believe Disney remains the best-positioned traditional media company to compete globally with the internet giants as video consumption moves online,” UBS Securities’ John Hodulik wrote in a research note Friday.
All told, Disney now projects 300 million-350 million streaming subscribers through fiscal 2024, including Disney Plus, Hulu, ESPN Plus, Star, and other products. CFO Christine McCarthy told investors Disney expects to spend $8 billion-$9 billion on Disney Plus content alone for fiscal 2024, when she said the streamer is expected to achieve profitability.
Still, the shift to direct-to-consumer streaming will put pressure on Disney’s existing TV business, analysts said. With Disney’s total spending on DTC content pegged at $14 billion-$15 billion by FY24, that implies the company will spend $4/sub on streaming programming compared with $7 for Netflix today, per UBS’s Hodulik. For Disney, “We believe this level of spend and tighter integration of the Disney DTC services will continue to pressure the linear sub base in the U.S.,” the analyst wrote.
While Disney outlined aggressive streaming subscriber targets for 2024, analysts also noted that the conglom predicts that 30%-40% of the projected Disney Plus base by FY24 will come from India’s Disney Plus Hotstar. That carries much lower pricing than other regions: In India, Disney Plus VIP is INR 399 (about $5.40) per year and Disney Plus Premium is INR 1499 ($20) per year.
