Disney Earnings Preview: Disney+ Steaming Growth In Focus After Netflix Stumble

Disney needs to add more than 9 million streaming users each quarter in order to meet its September 2024 goal of between 230 million and 260 million global subscribers.

Walt Disney  (DIS) – Get The Walt Disney Company Report shares edged higher Wednesday ahead of the media and entertainment giant’s third quarter earnings after the closing of trading, with investors focused on subscriber gains in its signature Disney+ steaming division. 

Analysts are looking for a big jump in the group’s bottom line, to $1.19 per share for the three months ending in June, Disney’s fiscal third quarter as accelerating theme park attendance helps overall revenues rise to just over $20 billion. 

Full focus on the report, however, is likely to center on Disney’s streaming service figures, given both the two consecutive quarterly declines in users reported by rival Netflix  (NFLX) – Get Netflix Inc. Report and Disney’s decision to boost the price of its ESPN+ subscription by 43%, to $9.99 per month, starting in late August.

Disney CEO Bob Chapek, who had his contract extended by another three years in late June, told investors in May that the group needs to “carefully watch” its content growth costs, but conceded that they move largely in tandem with subscriber gains. 

Disney added 7.9 million subscribers over its fiscal second quarter, which ended on April 2, taking ESPN+ to 22.3 million paid subscribers and Hulu to 45.6 million. 

Overall subscriber totals for its Disney+ streaming services hit 137.7 million, topping analysts’ estimates by around 2 million, while the company reiterated its aim of reaching a global Disney+ subscriber base of between 230 million and 260 million by the end of its 2024 fiscal year, a tally that would require adding 9.1 million new addition each quarter.

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“We foresee that the company will achieve its goal, thanks to the rising subscriber count and upcoming content,” said Cripsidea research analyst Subhendu Behera in a recent client note. “Since the majority of users watch sports globally, Disney has recently started to give stiff competition in the OTT market.”

“The company recognized that combining sports and entertainment content would give it the strong user base that is currently needed in the OTT industry,” Behera added.

Disney shares were marked marked 0.4% in pre-market trading to indicate an opening bell price of $108.60 each.

Last month, Disney also said it had secured a record $9 billion in ad spending commitments for its coming fiscal year. Known as “up fronts”, the advertising purchases suggest faith in both the group’s expanding digital platforms, including ESPN and Hulu, as well as its plans to introduce a tiered service for its Disney+ streaming platform.

Netflix, for its part, has lost more than 1.1 million subscribers over the six months ending in June, thanks in part to rising prices, increasing competition and password sharing.

To combat that exodus, Netflix also plans to launch an ad-supported streaming services, priced at a discount to its traditional offering, and noted that it’s in the “early stages” of rolling out a global plan that will prevent password-sharing.

An ad-support plan could bring in an additional 4.3 million subscribers in the U.S. and Canada, Netflix analyst John Blackledge from Cowen estimated last month, helping its global total rise to around 240 million by the end of next year.

“We’ll likely start in a handful of markets where advertising spend is significant,” Netflix said. “Like most of our new initiatives, our intention is to roll it out, listen and learn, and iterate quickly to improve the offering.” 

Reports also suggest Disney has been in talks with Walmart  (WMT) – Get Walmart Inc. Report aimed at adding its streaming services into the retail giant’s monthly $12.95 membership offering. 

The New York Times said Walmart has also held discussions with media rivals Comcast  (CMCSA) – Get Comcast Corporation Class A Common Stock Report, which owns the Peakcock streaming service, as well as Paramount Global  (PARA) – Get Paramount Global Report, which operates Paramount+ and Showtime. 


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