Disney Plus revealed a whopper of a subscriber update Wednesday — 50 million paying customers — flexing its ability to become a contender in the streaming services arena after a mere five months on the market.
That puts the Walt Disney Co. well ahead of schedule to hit its target of 60 million to 90 million subscribers by 2024, and a fighting step toward Netflix’s 167 million subs worldwide. So what does that mean for the streamers that are yet to come and the streamers that have only just come into being? The HBO Maxes, the Peacocks, the Quibis, the Apple TV Pluses? With most Americans confined to their homes for potentially the next month, maybe more, it’s tough not to look at Disney Plus’ smasher and wonder whether that signals success for its competitors — or whether the Mouse is nibbling at precious market share.
Wedbush equity analyst Dan Ives called the Disney Plus number “jaw dropping,” noting that that is nearly double the 28.6 million sub figure Disney disclosed on Feb. 4 on its quarterly earnings call. But it hasn’t impressed all of Wall Street to the same extent.
“It’s a big number, way above what anybody thought they were going to do six months ago, but given how well the U.S. launch went, 50 million shouldn’t be a big surprise to anybody,” Cowen media analyst Doug Creutz told Variety. “It’s a great number… but I don’t think it’s terribly surprising.”
He also surmised that even if the streaming platform hits its subscriber goal early, that doesn’t necessarily mean that it will become profitable earlier than its goal of fiscal 2024, believing that Disney will re-invest those subscriber revenues into content and marketing.
And the numbers, by some measures, are not as massive as they appear.
As Disney noted, eight million of those new subscribers are piggybacked on the existing Hotstar service in India, where Disney Plus just became available last week.
“When Disney Plus was launched in India, our understanding is that all Hotstar subscribers were converted to Disney Plus subscribers automatically,” wrote Bernstein analyst Todd Juenger in a note to clients on Thursday. “Since the Disney press release specifically references 50 million ‘paid’ subscribers, we believe only the Hotstar paying subscribers were included in that count, which apparently was eight million.”
That means that over the last two months, Disney Plus has actually picked up about 13 million or 14 million new subscribers. That’s nothing to sneeze at, but more in line with the expectations of some analysts, several of which had not factored in Hotstar subs into their Disney Plus projections. In Juenger’s eyes, an apples-to-apples comparison would consist of 42 million full ARPU (average revenue per unit) Disney Plus subscribers vs. his forecast of 40 million by the end of Disney’s fiscal year around September.
“Our first-blush view is, while the headline announcement is strong, and certainly we have no dispute that Disney Plus is off to a tremendous start, it doesn’t seem to us this announcement is actually much different/better than buy-side expectations, when adjusted for Hotstar.”
Creutz gives Disney credit for establishing a presence in a coveted market, however, noting how difficult it has been for Western media companies to break into India.
“It proves that there’s a market there for them,” he said. “It’s eight million people in a market where they had a very low Disney presence, so I think they’ve got to be happy with it.”
But one big splash does not necessarily beget another. Quibi launched on Monday to little fanfare (outside of its own), attracting a fraction of the attention online that Disney Plus or Apple TV Plus garnered during their respective launches last November.
HBO Max is the next major contender on the market. It’s got a very different value proposition than Disney Plus, touting a something-for-everyone-plus-prestige-TV package and a $14.99 monthly price tag. That consumers — the ones who don’t already subscribe to HBO for the same price, at least — may be loath to take on another monthly bill, on the brink of an economic recession, is a real possibility.
“I would say HBO [Max] is in a more favorable position than a startup, but with each service, the bar becomes a bit higher for them to justify why they should be part of your monthly spend,” Guggenheim Partners analyst Michael Morris told Variety.
The strength of HBO and WarnerMedia’s brands will also be key to its success come May. HBO has a great deal of leverage among viewers, as do Warner Bros. films and library properties like “Friends,” but it remains to be seen whether WarnerMedia has done enough to educate potential customers of what is included in the service, and whether the HBO Max brand is strong enough to brew the same fervor that Disney stirred up for its streamer.
“It’s an interesting product, but it’s not Disney,” said Creutz of HBO Max’s relative brand power.
There’s also Disney’s hearty pipeline of TV and movies that can readily be channeled onto Disney Plus. In an interview with Barron’s published Wednesday, Disney executive chairman Bob Iger noted that amid the closures of movie theaters and the current coronavirus-induced production shutdown, the company might put “a few more” theatrical releases directly on Disney Plus, such as in the case of “Artemis Fowl.” The streamer has already strengthened its appeal by tossing “Frozen 2” on there several months early, prompting Google searches for Disney Plus to spike the day the news was announced. Even so, the company appears prepared to wait out the studio and theater closures.
“In terms of movies going ahead after ‘Artemis,’ there may be a few more that we end up putting directly onto Disney Plus, but for the most part a lot of the big tentpole Disney films, we’ll simply wait for slots,” said Iger. “In some cases we’ve announced new ones already, but later on in the calendar.”
Meanwhile, Apple TV Plus does not have a similar, seemingly renewable source of blockbuster content and intellectual property.
“This is a fork in the road situation for Apple’s streaming endeavors as with Disney firing on all cylinders, Peacock and HBO launching around the corner with impressive content,” wrote Wedbush analyst Dan Ives on Thursday. “Now is the time for [Tim] Cook & Co. to attract subscribers, although lack of content (no new projects can roll out in light of the pandemic) remains the issue to keep them as a paying sub, with content/studios acquisitions potentially now in the cards for Apple to fill this gaping hole.”
He believes Apple plans to invest about $6 billion a year in original TV shows and movies in a bid to beef up its relatively thin slate of current programming, and has MGM, Lionsgate, Sony Pictures and A24 in its sights as potential M&A targets “to catapult its much needed content library.”
Limited content aside, Apple has the advantage of hardware: The company has an opportunity to pick up around 100 million Apple TV Plus subscribers over the next three to four years, wrote Ives, given its installed base of about 925 million iPhones globally. His estimate is that the service, which launched in November, already has 30 million to 40 million subscribers, although the “vast majority” of those are people who have gotten the service for free with the purchase of an Apple gadget.
And as Guggenheim’s Morris puts it: “It’s not a matter of a new product not necessarily being an attractive value, it’s more that you have a limited amount of time in the day, and if your entertainment needs are already being satisfied, the bar keeps getting raised for why you need to spend another dollar, even if it is a great value.”