Disney’s Investor Day Showcases The Importance Of Streaming

The happiest stock on earth held its annual Investor Day event yesterday, with a glimpse into its streaming future.

Dec. 12, 2020

While we’ve all been drooling over DoorDash and Airbnb’s massive IPOs this week, we’ve somewhat forgotten about the existence of Disney and the fact that the world’s greatest entertainment studio’s share price just hit an all-time high of $154.69 per share. 

From the depths of COVID despair in March, when its stock plummeted to a 5-year low of $85.76, Disney has roared back to life. How did it do this? 

Brand power, Disney+, and a sprinkle of magic…

At the Investor Day yesterday, Disney unveiled a slew of impressive Disney+ announcements, with over 100 movies and shows connected to franchises like Star Wars, Marvel, FX, and National Geographic.

The big takeaway from the night was that a mere year after its launch, Disney+ now boasts 86.8 million subscribers, up from the 73 million that it reported at the end of Q3. Coupled with its ESPN+ and Hulu subs, Disney now has more than 130 million active subscribers.

Because of these content additions, the company said it now expects to see between 230 million to 260 million subscribers to Disney+ by 2024, and only then did they mention the $1 price hike on subscriptions…

Is Disney+ important for the company?

Yes, it’s very important!

You wouldn’t know it given recent stock performances, but to say that Disney is having a tough year would be an understatement. Park closures have cost it billions and theatrical releases are floundering due to cinemas closing or putting restrictions in place.

That is until it reported knockout earnings for its fiscal fourth-quarter last month:

  • Loss per share: $0.20, vs $0.71 expected.
  • Revenue: $14.71 billion, vs $14.20 billion expected.

For a business that makes roughly a third of its money from theme parks, that’s not a bad result in the middle of a pandemic. However, Disney is clearly banking on its streaming service to start pulling some weight as a revenue driver. 

Disney executives said last night that Disney+ is set to reach peak losses in fiscal 2021 and will achieve profitability by fiscal 2024, giving us a clear plan as to where Disney’s streaming ambitions are going. 

In doing this, Disney is beginning to protect itself against overreliance on its Parks and Experiences segment, which brought in over $25 billion in revenue in 2019. By restructuring its primary focus to media and entertainment, Disney is lowering the risk of disastrous losses due to pandemics and the like in the future. It also opens up a new source of revenue to counter the threat of declining cinema sales, with the recent Disney+ launch of ‘Mulan’ proving that it can make money from original content without theaters. 

If you thought ‘The Mandalorian’ was a massive driver for subscriptions, just wait until they launch the first trailer for ‘Kenobi’.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above.