Thirteen short months ago Disney released their major foray into the streaming wars, Disney+. While they had an ownership interesting in Hulu and ran ESPN+, this was the flagship service everyone was waiting to see. Disney, along with Wall Street analysts, forecasted a modest growth for Disney+. Their five year forecast gave Disney+ 60-90 million paid subscribers by the end of 2024, a tough, but fair, milestone. While no other new streaming service would be expected to churn out those kinds of numbers in their first five years, Disney’s catalogue of classics gave them an edge and forecasters adjusted the goalpost accordingly.
Immediately after Disney+ launched in November 2019, industry experts realized that they severely underestimated Disney’s strength. Within a week of its launch, Disney had announced that they had 10 million subscribers on the first day. A feat no one saw coming. While much of the company suffered through 2020 due to Covid-19, there was a constant flow of positive news regarding Disney+. At each investor call we learned of new subscriber counts that exceeded expectations and sent Disney’s stock soaring. But it wasn’t until yesterday’s Investor Event that we saw exactly how massive this direct-to-consumer service had become.
Right off the bat we learned that, as of December 2nd, Disney had 86.8 million global paid subscribers for Disney+ alone. If that seems like a lot, compared to their forecast, you would be right. Disney hit the high mark of their five year forecast in one year. This alone was music to investor’s ears as they love the reliable and repetitive revenue generated from subscription services.
Toward the end of the event yesterday, Disney increased their end of 2024 forecast for Disney+ from 60-90 million paid subscribers, to 230-260 million paid subscribers. An astronomical jump that would have had any analyst fired had they predicted that last year. The success of any major service is always a combination of quality of service, fulfilling a real need from consumers, timing of launch, setting appropriate price points for the service, managing the costs associated with producing the service, and good, old-fashioned, luck. While that applies to Disney+, there are three major factors specific to Disney that help explain this unprecedented subscriber growth.
First, the unmatched strength of Disney’s catalogue of films, series, and specials from nearly 100 years of production. Disney has one of the most recognizable brands in the world with one of the deepest and most loved catalogue of films. Name one other media company or film studio that has had the number of hit movies dating back to the first half of the 20th century where the general public can identify that the films come from the studio. You can’t. While there are other classic films and successful movie studios, only Disney has the name recognition tied to practically all of their hit films. This is a strength that you can’t fake with clever marketing and it was the driving force behind the initial idea to launch Disney+.
Second, the brand strength from Disney’s more recent acquisitions. Over his tenure, former Disney CEO Bob Iger made huge investments into all areas of the Disney company. He invested billions into fixing previous CEO Michael Eisner’s Disney California Adventure in Disneyland just ten years after it opened, he oversaw the huge brand new park in Shanghai that opened in 2016, and he brought Star Wars Galaxy’s Edge into both Anaheim and Orlando. While impressive, his biggest contributions came in the way of acquisitions, in laymen’s terms he bought highly profitable brands. The list includes Pixar, Lucas Films (Star Wars), Marvel, and 20th Century Fox. This lead the way for some of the movie industry’s biggest box office hits, including Avengers: End Game, which holds the record for highest box office receipts of all-time. This allowed Disney+ to not only tap into projects that were already completed, but also to expand the worlds with new films, series, and specials. It also did something that people don’t talk a lot about, but has been huge for Disney+’s growth, it pulled these brands out of other streaming sites. Prior to Disney+ you would see Star Wars and Marvel films all over Netflix. But once they launched Disney+ these were all pulled and while Disney has lost some revenue from the licensing fees that they enjoyed for years, they are going to make it up in the long term. If it wasn’t for Iger’s forward thinking and risk taking Disney would not own some of the world’s largest brands. Without these brands, there would be no Disney+.
Third, India. This one is not as exciting as Disney classic films, Star Wars, Marvel, and Pixar, but it is a huge reason for Disney+’s sky-high subscriber count. When Iger purchased 20th Century Fox they not only picked up thousands of films and television series, they also picked up a number of streaming services. One of them was Fox’s 1/3rd interest in Hulu, giving Disney a 2/3 majority ownership in the more adult oriented streaming service. The other was Fox’s ownership in Hotstar, a streaming service based in India. This service has been around India for awhile now and has a great reputation. They stream Indian films, local specials, and series. When Disney launched Disney+ they decided to keep Hotstar active, as it has high name recognition among India’s population of over 1.3 billion, and they released Disney+ along with Hotstar. This has opened up a huge market for Disney+, in fact, India is expected to account for 30-40% of Disney+’s subscriber count by the end of 2024. A brilliant move from Disney CEO Bob Chapek and his team.
So there you have it, Disney+ is a success at a level that no one could have dreamed. Its updated five year forecast sits between 230-260 million subscribers, to put that in context, Netflix, after 13 years of streaming, sits at 195 million subscribers. Disney plans to surpass that by 50 million in just five years. Not too bad for a company that is pushing 100 years old.
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