UPDATED: Shares of Disney popped more than 13% Friday, 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.
Disney stock closed at an all-time high of $175.72 (up 13.6%), pushing the company’s market cap to just over $318 billion. To date this year, the company’s shares are up 21%. Netflix shares were in slightly negative territory most of the day, presumably on fears of greater competition from Disney, before a late rally to end the day up 0.4%.
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.
With potentially $35 billion in revenue from DTC for FY’24, that “would leave streaming as its single largest business” if Disney realizes its goals, Morgan Stanley’s Ben Swinburne wrote in a research note.
Even with the significant investment in DTC and gathering momentum, Disney didn’t signal an all-in plunge into the streaming pool. Unlike WarnerMedia’s move to release the entire Warner Bros. ’21 film day-and-date on HBO Max and in theaters, Disney is being more selective: Two films — “Pinocchio” starring Tom Hanks and “Peter Pan and Wendy” — will forego theatrical releases to debut on Disney Plus, while “Raya and the Last Dragon” will premiere on Disney Plus the same time as it opens in theaters next March (for a $30 rental), as Disney did with the live-action “Mulan.”
And, while some observers had speculated Disney might unveil a full standalone ESPN streaming service, which would be a major blow to the pay-TV sector, that wasn’t in the offing. 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 FY’24, 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.
In a similar vein, Swinburne noted, “it is possible the U.S. pay-TV business sees incremental cord-cutting as Disney and others pour capital into unbundled services.”
Despite Disney’s aggressive streaming subscriber targets, analysts also noted that the conglom predicts that 30%-40% of the projected Disney Plus base by FY’24 will come from India’s Disney Plus Hotstar. That carries much lower pricing than other regions: In India, Disney Plus VIP costs INR 399 (about $5.40) per year and Disney Plus Premium is INR 1499 ($20) per year.