Disney's New 28 Million Subscribers Means Trouble For Netflix
Through massive online marketing, competitive pricing and deep inventory of content that caters to all ages, Walt Disney Co buckled down to work and let Disney Plus rake in more than 28 million new subscribers on Tuesday.
Many would think such a feat is no match for Netflix Inc, which boasts of 167 million subscribers. Yes, true -- but this number took the company more than a decade to muster. Disney Plus, in this case, took less than three months, to get that many subscribers.
Disney's solid top and bottom lines for the first three months ending December has pushed shares to climb early Tuesday. But the company is not being complacent by jubilating this early as its stock has retreated slightly since it posted its earnings for the year so far, with the battle in the video streaming front just starting.
Walt Disney benefited from a solid first-quarter run for its newly-unveiled Disney Plus streaming service, introduced in November last year. The company generated total sales of $20.86 billion in first-quarter 2020, reporting a growth of 36 percent, year on year.
Studio sales more than doubled to $3.76 billion, lifted by major blockbusters - Frozen 2 and Star Wars. However, the highlight of the disclosure was Disney Plus's 28 million paid subscribers, beating the company's own highest estimates.
More than half of Disney Plus' subscribers came via disneyplus.com, where the media and entertainment giant does not share revenue with others. Disney added more than $10 billion to its fiscal year revenue base, driven by growth across all of its operating units.
The biggest change in revenues, however, was courtesy of a sharp increase of $6 billion in the Direct-to-Consumer Division due to higher advertising profits led by the expansion of Hulu operations and on Disney's international platforms, along with higher subscription fees from its international product sales.
Disney's earnings came in at $1.53 per share for Q1 2020, surpassing market projections of $1.43 per share. Analysts believe that better-than-estimated earnings and the promising debut of Disney Plus, in addition to a positive forecast with expansion plans in India, will help Disney's share price to spike in the near term.
Disney's ability to feel the pulse of its fanbase is its primary strength, along with Marvel, Pixar and, of course, Star Wars. Taking advantage of its own jewels in-store instead of having other entities license them out has surely paid off.
But Netflix is still a force to reckon with as the company's recent quarterly earnings report indicates that it continues to attract new subscribers with a good number of those coming from outside of the United States, where growth has significantly ebbed.