If The Walt Disney Co.'s streaming business grows as expected, analysts say the company's combined subscriber reach could challenge or surpass Netflix Inc.'s leadership position in the streaming space within the next few years.
At its recent investor day, Disney boosted the guidance for its Disney+, Hulu and ESPN+ platforms to 300 million to 350 million combined customers by the end of fiscal 2024, up from its current combined count of 137 million direct-to-consumer subscribers. That subscriber growth will be driven by $14 billion to $16 billion in content spend across those platforms, excluding programming costs for Hulu Live.
Analysts widely agree this subscriber projection would put Disney above Netflix by the end of 2024, with Disney enjoying the advantage of its competitive pricing and deep content library.
 CEO Bob Chapek revealed Disney's global streaming expansion plans at the company's 2020 Investor Day. Source: Business Wire |
Macquarie Capital analyst Tim Nollen expects Netflix to have 295 million global subscribers in 2024, below even the low end of Disney's projected range. Netflix ended the third quarter this year with 195 million global subscribers.
RBC Capital Markets analyst Kutgun Maral wrote in a note that at the midpoint of its projected sub range, Disney's DTC streaming base ranks above calendar year 2024 consensus estimates for Netflix's paid streaming subs. He noted that Disney executives see the total addressable market at some 1.1 billion, with their more aggressive outlook rooted in higher penetration models.
From a content-subscriber efficiency basis, Wells Fargo analyst Steven Cahall gives Disney the edge over Netflix. Cahall, in a note, calculates that with estimated content expense between $14 billion to $16 billion, and the midpoint of sub projections at 325 million, Disney would allocate $1 billion for content for every 15 million subscribers it added. By comparison, Cahall estimates that Netflix will be adding 13 million subs for every $1 billion in content spend in 2024.
He attributes Disney's better consumer acquisition-cost ratio to its library of fully amortized content. "It's no knock on Netflix, but Disney can get to scale on less incremental content spend, and thus can get away with a lower ARPU," Cahall wrote.
Disney+ currently costs $6.99 per month in the U.S., but the company plans to raise the price to $7.99 early next year. The Disney bundle with Disney+, Hulu and ESPN+ will be priced at $13.99 per month. By comparison, Netflix's basic plan costs $8.99 and its standard plan costs $13.99 per month.
Looking forward, Cahall expects Netflix to end 2024 with an estimated 280 million subscribers, well below Disney's projected range.
MoffettNathanson analyst Michael Nathanson is also bullish, pointing to the inclusion of Star in Disney+ in certain international markets. Star will launch in Europe and several other international markets in February 2021 as a fully integrated part of Disney+, with its own branded tile. It will offer thousands of hours of TV and movie content from Disney Television Studios, FX, 20th Century Studios, 20th Television and more
"We believe that the inclusion of Star content on Disney+ broadens the service's appeal and market penetration potential, driving meaningful subscriber upside versus both last year's guidance and our prior estimates," Nathanson wrote.
Nathanson now expects Disney+ on its own will tally 250 million by the end of fiscal 2024, up from his previous estimate of 155 million. Adding in Disney's other streaming services, he expects Disney will reach 345 million total DTC subscribers in fiscal 2024.
By comparison, he expects 303 million subscribers at Netflix over the same time period.
After hitting an all-time high in midday trading on Dec. 11, shares in Disney closed at $175.72, up more than 13% from their prior-day close.