theStreetFika: Scones, Sips, Strategy & Stocks

There aren't many better times to launch a family-friendly streaming service than 4 months before everyone gets locked inside — and it showed for Disney. After launching in November 2019, Disney+ went on to hit 100 million subscribers in record time. People were watching more content than ever, and Disney felt confident it could raise its targets. It settled on a goal of between 230 million and 260 million subscribers by the end of 2024. After such a fast start, many thought that would be easy for Disney but when it reported its latest earnings Disney said things were slowing down and reported that it added just 2 million new paid customers in its latest quarter. Investors responded by sending Disney's shares down more than 7%. Investors didn't care that Parks swung back into profit or that Disney believes it is still on track to hit 230M to 260M subs by 2025. Many investors worry growth for Disney+ is tapping out. With streaming growth stalling, what can save the day for D...

Oh, great, another streaming service. That might have been your reaction to the news that AT&T and Discovery are planning to merge their media assets together, to better take on the streaming giants of Netflix, Disney & Amazon. For the companies involved, this deal makes a lot of sense on paper. Both AT&T and Discovery, the former of which has a sprawling telecoms business, have seen relatively lackluster corporate performance in the last 5 years — which has been reflected in their share prices. This deal hopes to take the underperforming media assets from AT&T, which includes HBO, CNN and the Warner Bros. studio (responsible for Harry Potter and many other titles) and combine it with Discovery's relaxing cooking, home renovation and nature content. Although it may take a while to happen, presumably the plan is to merge the assets under one big streaming brand. That brand would have an ~80 million strong streaming subscriber base, with 15 million coming from Discove...

In a little over a year, Disney+ has accrued nearly half of the number of subscribers Netflix has accumulated over the past decade. Netflix is currently sitting at a lofty 204 million — but is growing much more slowly. Disney's performance has been so phenomenal that Netflix co-CEO Reed Hastings has named Disney his top competitor. He told Bloomberg last September, “If you’d asked us a year ago, ‘What are the odds that Disney+ is going to get to 60 million subscribers in the first year?’ I’d be like 0. I mean how can that happen? It’s been super impressive execution.” For the record, Disney+ is not second. That honor goes to Amazon Prime Video which has 150 million subscribers. However, it's hard to compare it to Disney+ because Prime is a bundle of different services. After Disney, there is Hulu which has just under 40 million, and then there's a smattering around 10-30M (HBO Max, CBS, Discovery, ESPN and Peacock). Best of the rest While Disney+ has been stealing the headl...

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 announc...

Yesterday Disney said that its primary focus for entertainment is streaming and announced a major Disney+ focused reorg of its media division. Why now? While Disney's theme park and film divisions were reeling from the pandemic, Disney+ was able to save the company from an even worse fate, and in the process catapulted itself for a bigger role going forward. Disney was also facing external pressure to invest more in streaming. Last week, activist investor Dan Loeb called on Disney to end its dividend and invest more funds into Disney+. Does it make sense? Not if you're a movie theater owner. For Disney, the move makes a lot of sense. It puts streaming at the center of Disney's entertainment business. As discussed in my previous post on  Disney+ , we can expect to see more releases that follow the Mulan model. And definitely, I don't expect to see increases in Disney+ prices.   Disclaimer: This post is merely my own assessment and is not an investment recommendation. F...

Earlier this week, activist hedge fund Third Point wrote to Disney's CEO Bob Chapek to ask him to stop paying dividends permanently and invest the money (~$3 billion) in obtaining original content or marketing for Disney+. Disney already suspended its dividend payout in June and is expected to halt its next one as well. I'm with Third Point that Disney needs to halt paying dividends immediately for the foreseeable future - at least until the pandemic is behind us. Canceling dividends last minute each time is not a good strategy because the money can't be spent on anything if it's set to cover dividends.  However, I don't agree with Third Point's recommendation to hike up the price of Disney+. While Disney+ competes with Netflix for consumer attention, the goals of the two services are very different.  For Netflix, streaming is its entire business, the sole driver of its revenue and profits.  For Disney, Disney+ is not about earning subscription revenue; rather, ...