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Disney’s global streaming moves impress investors

It is beating all its previous guidances.

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MUMBAI: Financial analysts  and investors who have been backing the Disney stock are grinning ear to ear following Disney’s 10 December Investor Day announcements. Not only has the mouse house beaten the street’s expectations, it has also whipped its own guidance given to investors as far as its streaming service Disney+ is concerned.

It announced that it had managed to add 13.1 million subscribers between October 2020 and 2 December 2020 to take Disney+’s tally up to 86.8 million subs. The steroidal performance is eye popping as that’s a target it had set for 2024 when it launched in 2019. Yes, the naysayers may say that the gold standard in streaming, Netflix, is about to touch 200 million subs globally. But remember Disney+ reached the 50 million sign up mark within five months of launch; its October 2020 figure was 73.7 million.

Here’s more: the media & entertainment behemoth said that it has revised it 2024 outlook for the number of subs to 230-260 million from the 60-90 million it had set for that year during its last Investor Day in April 2019. Dsisney+Hotstar would account for 30-40 per cent of that; equating to 69 million-78 million and 92 million-104 million subs for the Indian streamer.

Here’s even more: it revealed that it would be upping monthly prices by a single US dollar to $7.99 in the US and to €8.99 in Europe come March 2021.

Sister services such as Hulu and ESPN+ have also performed notably well. The former which was predicted to hit 40-60 million subscribers by FY2024 announced  a figure of 38.6 million, while ESPN+ registered 11.5 million against its FY2024 guidance of 8-12 million. It has revised its guidance for FY2024 to 50-60 million for Hulu, with profitability expected to come to it a year earlier than guided last year. Its Hulu bundled offerings are also surpassing previous projections. Its Hulu+Live TV package which is priced at $64.99 with ads, and $70.99 with no ads has notched up four million subs.

Ditto in terms of subscribers for ESPN+; the forecast is that it will cross 20-30 million paid subscribers by end FY2024, and be in the black by 2023.

In all probability, Hulu will stay put as a US domestic service and Disney will extend the Star brand –  the cash cow in India which it got when it acquired 21st century Fox from the Murdochs – globally. Australia, New Zealand, Europe, Canada and Singapore will get to see Star as a tile in the Disney+ offering along with Disney, Pixar, National Geographic, Star Wars and Marvel. A brand new streaming service branded Star+ is to be launched across Latin America in June 2021 with an entertainment show and live sports programming lineup. Pricing has been put at $7.50 standalone and $9 when bundled with Disney+.

So enthused has the mouse house’s management  been with Disney+’s performance, it has decided to double its projected spend on content from $4.5 billion for 2024 as estimated during its previous investor day in April 2019 to $8-9 billion. It expected its operating losses to peak between 2020-22; but it now predicts that the landmark will be reached in 2021. The profitability horizon has been maintained as FY 2024.

Collectively, the Disney team has set itself a target of 300-350 million subscriptions by FY 2024. Will that take it ahead of Netflix as a whole at that time?

In all probability, yes. With limited headroom for growth from 2022, it’s quite likely that the Reed Hastings-headed streamer will have to work hard to rope in subscribers. Even in India — one of its key growth markets — where it has different subscription slabs in order to lure different income strata in Indian society. Estimates are that Netflix in India has single digit million subscribers. Hedge fund Third Point founder Dan Loeb, who has been constantly cheerleading Disney to invest increasingly in Disney+, should have little reason to complain now that the organisation has pivoted itself around streaming.

The market responded well to Disney’s Investor Day announcement. The stock was trading at a high of $173.96 against the previous day’s close of $154.69.

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