Walt Disney Co. told investors it has seen the future of its business — and it is squarely on digital devices.
The media giant
DIS,
During a four-hour virtual extravaganza, the spotlight was on Disney+ as the 97-year-old company navigates a national pandemic that has seriously undercut its traditional businesses. Disney also provided growth updates on its other streaming platforms, including ESPN+ and Hulu, and a new general entertainment offering, Star, which will debut overseas in the coming months.
“All or our content will eventually end up in Disney+,” Disney Chief Executive Bob Chapek said in opening remarks, noting that Disney+ has 86.8 million subscribers as of Dec. 2.
Subscriber growth has blown past original fiscal 2024 projections: In addition to Disney+’s current 86.8 million members, Hulu has drawn 38.8 million subscribers, and 11.5 million to ESPN+, according to Rebecca Campbell, Disney’s chairman of Direct-to-Consumer & International.
Investors have keenly focused on what Disney had to say as studios evolve their approach to movie distribution. COVID-19 has forced them to delay major films and premiere others via streaming services. In September, Disney unveiled “Mulan” on Disney+ as part of a “premium access” experiment, charging subscribers $30 for indefinite access. The latest from Pixar, “Soul,” is scheduled to land on Disney+ on Christmas Day for no additional cost.
Wells Fargo analyst Steven Cahall, who has raised his rating on Disney stock to overweight from equal weight, expects subscriber growth to replace earnings per share as the key metric Disney investors care most about.
Like several other media analysts, MoffettNathanson’s Michael Nathanson had anticipated aggressive direct-to-consumer spending to expand streaming subscriptions. What was unclear, he said in a Dec. 7 note, was whether Disney would pursue a more scrappy ESPN+ strategy and the full financial impact of the company’s new Star service.
Read more: Disney can ‘torch’ earnings to build a streaming powerhouse, bullish analyst says
The media titan has careened from one crisis to another the past year because of the COVID-19 pandemic: Disney has shuttered theme parks and cruise line, put a pause on production efforts for films and television shows, and announced more than 30,000 layoffs. The company limped to the end of the fiscal year with its first annual loss in more than 40 years — a GAAP net loss of $2.83 billion.
The hemorrhaging didn’t end there. Bob Iger left as chief executive and his replacement, Chapek, has overseen deep staffing cuts at Disney’s theme parks and cable sports network ESPN while revamping the executive ranks to accelerate a shift to streaming.
Streaming has been a bright spot for Disney. In its first year, Disney+ zoomed to 73.7 million customers despite bare-fisted competition from the likes of Netflix Inc.
NFLX,
Disney, for example, premiered its long-delayed “Mulan” live-action feature on Disney+ as a pay-per-view option for $30 on Sept. 4.
“Every studio, every entertainment provider who relies on theater-based revenue has to rethink the model,” Ari Lightman, professor digital media and marketing at Carnegie Mellon University’s Heinz College, told MarketWatch. “Relying on the traditional Hollywood way, in hopes of bringing a two-year production like The Avengers to theaters and enjoying a billion-dollar blockbuster, that model is over.”
How Disney intertwines its streaming push with the expected return of millions of Americans to theme parks with the availability of vaccine next year is likely to be a focus, says Lightman. “Disney in uniquely positioned to capitalize on bringing its experiential experience” for consumers throughout its businesses, he added.
If nothing else, the pandemic should also underscore the vigilance with which media companies closely guard their content exclusively via their digital platforms. Disney took all its Marvel content off of Netflix, and said it was only for Disney+, according to Lightman.
