7 things we learned on Disney Investor Day

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the Walt disney (NYSE: DIS) Investor Day on December 10 was full of updates for the company’s direct-to-consumer streaming activity. It’s been 13 months since Disney + launched, and the service – along with Hulu and ESPN + – has far exceeded the company’s expectations on its Investor Day in April 2019.

With this outperformance and the changing landscape of the media industry amid the COVID-19 pandemic, Disney has made some big changes to its view of the streaming industry. Here are seven key takeaways for investors.

Image source: Disney.

1.17 million subscribers

As of December 2, Disney had 137 million total subscribers across its three streaming platforms.

A service

Disney +

Hulu

ESPN +

The subscribers

86.8 million

38.8 million

11.5 million

Data source: Disney. Chart by author.

About 30% of that Disney + number is made up of Disney + Hotstar subscribers in India and Indonesia. These subscribers pay much lower rates than the rest of the world.

The three services are still growing strongly over the past two months. Disney + has added 13.1 million subscribers since the end of its fiscal fourth quarter on October 3. Hulu added 2.2 million and ESPN + 1.2 million.

2. Expect a lot more subscribers

CFO Christine McCarthy updated the company’s 2024 subscriber outlook with much bigger numbers.

A service

Disney +

Hulu

ESPN +

Original 2024 outlook

60 million to 90 million

40 million to 60 million

8 million to 12 million

New perspectives 2024

230 million to 260 million

50 million to 60 million

20 million to 30 million

Data source: Disney. Chart by author.

McCarthy notes that 30-40% of the Disney + outlook is made up of Disney + Hotstar subscribers. She also expects average revenue per ESPN + subscriber to decline due to more customers receiving discounts from bundles.

3. Growing content budgets

Disney plans to release around 100 titles per year in the future, of which around 80 are direct to its streaming services. His new corporate structure will allow them to stay flexible and decide on the best distribution path for each piece of content they create to maximize value.

McCarthy expects the Disney + content budget to skyrocket to $ 8 billion to $ 9 billion by 2024, from $ 4 billion originally planned. This includes content from its Star and Hotstar services, which are part of Disney + in certain international markets.

Overall, Disney will spend $ 14 billion to $ 16 billion on streaming content in 2024. McCarthy also notes that the company is changing the way it allocates content spending across its divisions to provide a clearer picture of the impact. spending on content on its various activities. She didn’t say whether this accounting change increased or decreased the streaming content spending she provided, however.

Despite growing content budgets, the payback time remains virtually unchanged.

The Disney + home screen on a television

Image source: Disney.

4. Everything about the next Star service

Star will be Disney’s general entertainment brand in markets outside of the United States, similar to Hulu in the United States. Content will vary by region and will include local market offerings as well as content from Disney TV Studios, 20th Century Studios, FX and other Disney properties acquired in its acquisition of Twenty-First Century Fox. Disney will not sell Star as a separate service in Europe, UK, Canada, Australia, Japan, Korea and similar markets, but instead will include it as part of Disney +.

In Latin America, Disney will sell a separate service called Star +. It includes content similar to Star with the addition of sports programming. While it’s available on a stand-alone basis, Disney expects most subscribers to bundle the service with Disney +. He did not provide any pricing details for Star + or the bundle.

5. Price increases are coming

New Disney + subscribers in the US will pay $ 8 per month starting in March. In markets where Disney adds more content to Disney + under the Star brand, the price will increase by two euros ($ 2.43) or the local equivalent.

At an investor conference in September, McCarthy said the company will look to raise prices because it adds additional content to the service. Given the increased budget and production of content for the service, the announcement comes as no surprise. In a question-and-answer session after the Investor Day presentation, she said average revenue per user will be a priority going forward, but the main directive is to increase the subscriber base. .

6. Premier Access will stick around

Disney introduced Premier Access in September with the release date and date of Mulan in theaters and Disney +. Subscribers could pay an additional $ 30 for early access to stream the film. The management stated in its call for fourth quarter results that he was satisfied with the results of Mulan but provided no further details.

The next Premier Access title will be Raya and the last dragon in March.

When asked if Premier Access is useful in a post-COVID world, CEO Bob Chapek said he thinks so. He pointed out that theatrical releases still hold a lot of value for Disney and that the new cast team will determine the best way to bring new films to audiences. He also noted that there is simply not enough data on how consumers are reacting to Premier Access to know what role it will play in the future.

Hulu + Live TV on TV, tablet and smartphone

Image source: Hulu.

7. Hulu generates a lot of advertising revenue

Maybe all the announcements were lost in a little detail about Hulu’s growing live TV business. Hulu president Kelly Campbell said the company makes an average of $ 10 per month from its live TV subscribers.

It’s a huge competitive advantage for Hulu because it allows it to deliver similar ranges of content to its competitors at a lower cost to the consumer. This should allow him to keep gain market shares, providing support for Disney’s television network activities while expanding the points of contact for selling Disney’s other streaming services.

Hulu + Live TV subscribers can also get the bundle price for the addition of Disney + and ESPN +. And Hulu integrates ESPN + directly into Hulu, allowing users to add the service in the same way as the other premium streaming networks it sells.

A lot to like

Disney certainly impressed with its presentation. Investors sent shares of media stock higher on updated subscriber numbers and improved outlook. The transition to streaming is still in its early stages, and it looks like it’s going to be a huge undertaking for Disney.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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