Disney+ Subscriber Growth Slows, Shocking Investors and Analysts
By Movieguide® Staff
Disney+ rocketed to 100 million subscribers from Nov. 2019 to March 2021. However, Wall Street analysts say the streaming platform’s numbers in 2021 could mean a slower climb than anticipated.
The company reported 8.7 million Disney+ subscribers over the first three months of 2021, nearly 6 million fewer than Wall Street predicted.
Research analysis firms like Digital TV had previously expected Disney+ to surpass Netflix in total subscribers by 2026. Although Morgan Stanley analyst Ben Swinburne “remains confident” that Disney’s forecast of 230 million to 260 million subscribers by the end of fiscal 2024, the curve could appear more gradual than previous estimates.
“It was clear at Disney’s December 2020 investor day that the content quantity would be more modest in F21 given COVID’s impact on production,” Swinburne wrote. “The key titles and quantity of key titles really begin in F22 in earnest, building further into F23.”
Swinburne also noted that other Disney businesses would benefit from loosened COVID-19 restrictions.
“As the pandemic subsides over time, sports returns to its normal cadence, and consumers return to theaters — all of Disney’s related businesses should recover quickly and contribute to significant earnings growth,” Swinburne wrote.
Bernstein Research analyst Todd Juenger estimated that “core” Disney+, excluding Hotstar, added roughly 3 million subscribers in the latest quarter, compared with 13 million in the final quarter of 2020.
“We estimate ex-Hotstar, Disney+ must average 5 million net adds per quarter – for the next 14 quarters – to achieve fiscal year ’24 guidance,” he explained. “Management told investors to expect a deceleration” over the next couple of quarters “due to Hotstar India and [a] delayed Latin America Star+ launch.”
MoffettNathanson analyst Michael Nathanson noted that Wall Street primarily focussed on streaming-related numbers.
“A long time ago in a galaxy far, far away, our simple thesis on Disney was that the company … was an earnings beating machine with Street forecasters continually under-estimating its dynamic parks and content engines, regularly leading analysts to push their earnings forecasts higher, which in turn drove up the stock,” Nathanson explained. “[Now] on earnings day, the market – as it has with Netflix – becomes focused on one single metric: Disney+ subscriber growth.”
He continued: “Interestingly, in that long ago time before Disney’s direct-to-consumer pivot, this quarter’s blow-out earnings results would have pushed Disney’s stock higher, as operating profits came in better across the board.”
As Movieguide® previously reported, Disney will not make its previous blockbuster paydays, though, depending solely on streaming:
Can Disney make any money off these titles if they spend less time in theaters and more time on Disney+. It’s simple economics, if Disney offers all their content for a low monthly subscription of $6.99, they lose out on a significant portion – if not all – of their profit for each movie. A family and friends can watch lots of Disney, Marvel and Pixar movies each month, that they would have to pay around $10 per person each to watch at the theater.
Take the 2020 version of MULAN as an example. The movie was one of the first to be delayed and eventually completely removed from a theatrical release in the United States due to the Coronavirus pandemic. MULAN supposedly cost Disney $200 million to make. To date, it’s grossed less than $70 million worldwide, leaving Disney in the hole for more than $130 million.
Now why would they want to apply that same treatment to much of their future products? …
The writing is on the wall for theaters and for studio profits. The model adopted during the pandemic is far from sustainable. A crash is coming that will change the industry as we know it.
Disney and Wall Street would both do well to realize that much of the profit will depend on how fast Disney can get movies back into theaters and then merchandize products to increase revenue.