Disney+ is quickly catching up to Netflix but it doesn't make as much money per sub

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Disney+ has hit 100 million paid subscribers, just 16 months since its launch. That puts Disney roughly halfway to catching up to Netflix's subscriber base, which is currently sitting at a lofty 204 million — but is growing much more slowly.

The pandemic has almost certainly accelerated the trajectory of Disney's growth, as we all ran out of things to watch pretty quickly, but even considering COVID the Disney+ performance has been remarkable. Disney originally expected to have between 60 and 90 million subscribers by 2024, the company now expects more like 230 million subscribers by 2024.

Disney is adjusting well for the unexpected popularity of Disney+. It now firmly believes that its direct-to-consumer business is its top priority and it is going from an entertainment company with a streaming service to a streaming service that sells Mickey Mouse hats. So much so that it has restructured its media and entertainment divisions to focus on its streaming platform, and it announced plans for about 100 new projects, 80% of which are for Disney+.

Don't forget about Disney's parks

Though Disney+ is growing rapidly, Disney isn't making nearly as much money per subscriber as Netflix does. so should this be alarming for investors?  

Certainly not. As mentioned previously, Disney+ was priced so low to make it a non brainer for anyone to subscribe. The overwhelming majority of customers will always choose Netflix and Disney wanted to make sure that customers also choose Disney+ instead of the many other options (HBO Max, Apple TV+, etc.).

Disney priced Disney+ so low to maximize the revenues per customer from all the Disney products; it's not to maximize the revenues per customer from Disney+. Disney+ is a way to connect with customers and lure them to Disney's much larger suite of products and businesses.

The pandemic has closed Disney's parks and Disney's revenues and profits took a massive hit. However, things are starting to look up. With California relaxing restrictions on theme parks, Disneyland will open in late April, while the company's Florida parks are currently open at 35% capacity.

I'm confident that Disney+ will do its job of connecting Disney with customers and lure them to Disney World, Disney Cruise etc. For me, Disney remains is a very solid long term.

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.

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