Streaming's Golden Ticket

Aspiring to be like Netflix in streaming is an ambitious goal. The risk is always being held to that standard, even when the comparison is not quite right.

That's what appeared to happen to Walt Disney yesterday, as CEO Bob Chapek spoke at the  Goldman Sachs Communacopia Conference.  

After cautioning that subscriber growth numbers "tend to be a lot noiser than a straight line," the CEO  said that Disney's global paid subscriptions would increase by "low single-digit millions" in the fourth quarter from the third.

Investors seized on that projection and took Disney's stock, which was in positive territory yesterday afternoon, down for a loss of  4.2% on the day. Today, the stock bounced back a bit, rising 1.4%, to $173.65. 

The stock decline yesterday was an overreaction, several Wall Street analysts said today, and it points to the complexity in understanding Disney's streaming offerings in comparison to Netflix's all-in-one packaging.  On Barrons.com today, Nicholas Jasinski explained the nuances:

Unlike Netflix , Disney’s global streaming strategy is far from one-size-fits-all. It offers its services in different bundles and under different brands in different markets. Disney+, Hulu, and ESPN+ are U.S. offerings, while Disney+ in Europe and Canada includes an additional channel with Hulu-like content. The company’s service  is called Disney+Hotstar in India and Star+ in Latin America, which both include sports content. Prices vary widely by market, as well. 

All those subscriber numbers get lumped into one global bucket, even though the revenue generated in those different markets and by those different offerings varies greatly. Disney+ costs $8 a month in the U.S., for example. Each Disney+Hotstar subscriber brings in about 45 cents of subscription revenue a month, Nick notes. 

Douglas Mitchelson of Credit Suisse wrote:

Disney lost $14 billion of market cap on Tuesday, almost entirely when CEO Bob Chapek made his business update commentary. That amounts to ~$5 million for every Disney+Hotstar subscriber we removed from our model, subscribers that are clocking in at $0.45/mo of subscription revenue.

Another sort of  Disney-Netflix comparison could be made today. Netflix is acquiring the Roald Dahl Story Co., giving the streaming leader the rights to stories and characters from Roald Dahl's books like Charlie and the Chocolate Factory, The Fantastic Mr. Fox, and Matilda.  

No financial terms were disclosed, but it is estimated to be the largest acquisition ever by Netflix. 

And it's very much a page out of the Disney playbook. Content-focused deals for Pixar and Marvel expanded the Disney empire by leaps and bounds. Its biggest deal came in 2019, with the $71.3 billion acquisition of 21st Century Fox assets. The Dahl deal is also a big bet on children's or family friendly programming -- the very heart of the Disney brand.   

The streaming wars are about to get more interesting.