Disney’s distribution deal with Verizon, which will see the wireless giant give new and existing subscribers one free year of Disney+ will help the subscription service grow even more quickly than expected.
That’s the takeaway from at least two veteran Wall Street media and telecom analysts, Michael Nathanson of MoffettNathanson and John Hodulik of UBS. Disney stock didn’t perk up on the news, closing Wednesday at $131.13, down 1%. Though it has surged more than 19% in 2019 to date, largely on optimism over the company’s grand pivot to streaming, the stock has paused for a breath over the past month. It has been moving sideways in anticipation of the November 12 launch of Disney+. The company may provide updated commentary on its streaming plans on November 7, when it reports quarterly financial results.
In a note to clients Monday extending his “buy” recommendation on Disney shares, Nathanson updated his subscriber forecasts for Disney’s streaming services. He now sees 8 million global Disney+ subscribers by the end of 2019, with 18 million by the end of fiscal 2020. Hulu, he predicts, will have 38 million subscribers and ESPN+ will have 8 million by the close of fiscal 2020, with 5 million customers opting for the $13-a-month bundle of basic, ad-supported Hulu, Disney+ and ESPN+.
The $71.3 billion acquisition of Fox and the buyout of Comcast’s minority stake in Hulu, on top of a clearly articulated direct-to-consumer streaming strategy, makes Disney a bold player, in Nathanson’s view. “Rarely has a company willingly created this much financial disruption in strategically pivoting to a new business model,” he wrote.
Hodulik of UBS did not officially raise his subscriber estimates for Disney+. But the analyst singled out the Verizon-Disney partnership as a tailwind in a note to clients Tuesday. It “is another example of Disney’s advantages in its effort to gain scale in [direct-to-consumer] services in the ‘land grab’ phase of the market,” he wrote.
In an interview with Deadline, Hodulik noted that Verizon is one of the top brand advertisers in media. “They’re going to be promoting this service heavily,” he said. Previous streaming-wireless promotional combinations like Sprint-Hulu and T-Mobile-Netflix have been effective, but both centered on already-established services. “Disney+ is brand-new, so to get this kind of promotional real estate is significant.”
Disney CEO Bob Iger was pressed for updated estimates for Disney+ during two conference appearances Tuesday, but he demurred, alluding to extensive forecasting by the company at its April investor day. The company said at that time that it expects to reach between 60 million and 90 million global streaming subscribers by 2024.
More services will join the pursuit of Netflix after Disney+ debuts on November 12 and Apple TV+ goes live on November 1. WarnerMedia’s HBO Max will launch next spring, and NBCUniversal is preparing its ad-supported entrant, Peacock, for an April 2020 bow.
Hodulik plans to attend Tuesday’s WarnerMedia investor day, which is expected to yield substantive details about the company’s HBO Max streaming offering. Given the jump in Disney stock immediately after its April event (including a 10% jump on the following trading day), “I expect WarnerMedia to take at least a page from Disney’s playbook,” Hodulik said.
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