Walt Disney Co. displaced Netflix Inc. as king of the video-streaming market, and it is expected to widen the gap.
Disney seized the mantle three months ago as its potent content troika of Disney+, Hulu and ESPN+ reached 221 million customers, edging Netflix’s 220 million subscribers. Analysts expect Disney to report more than 10 million net new subscribers in the third quarter, which would greatly outdistance Netflix’s NFLX, addition of 2.4 million subscribers in the period.
The competition should increase as both companies launch advertising-supported platforms in the fourth quarter — Disney plans to launch in the U.S. on Dec. 8 after Netflix NFLX, -3.07% unveiled its own ad-supported service for $6.99 a month in the U.S. on Nov. 3. And analysts still like Disney’s chances to outperform the streaming pioneer.
“Disney+ ad-supported will do very well and outshine Netflix” Corey Kulis, vice president of marketing at software company Verve Group, predicted to MarketWatch. “While Netflix needs to develop and partner for technology, stand up a new organization, get introduced to buyers, and so on, Disney has all this in place.”
When the Disney+ ad tier debuts in the U.S., and overseas in 2023, UBS analyst John Hodulik expects Disney+’s ad-tier service to add $1 billion in incremental revenues in its first 12 months. Macquarie Research analyst Tim Nollen models slightly less, an $800 million sales opportunity next year if all markets were to launch, but also foresees Disney’s direct-to-consumer revenue outpacing linear networks by the fourth quarter.
“We think near-term subscriber growth will accelerate on content releases and international expansion, and next year’s slate looks impressive too, after ‘Black Panther 2’ and ‘Avatar 2’ release in theaters in November and December, and follow on Disney+,” Nollen said in an Oct. 31 note that maintained an outperform rating and price target of $140.
Insider Intelligence expects the ad-supported tier of Disney+ to reach $1.02 billion in the U.S. in 2023, and $1.19 billion in 2024.
“Disney already knows its audience and the advertising industry incredibly well,” Ashwin Navin, CEO of Samba TV, said. “The significant opportunity to align with its top-tier content will accelerate new and untapped dollars flowing into Disney’s ad-supported streaming service.”
Disney’s subscription and revenue growth in video-streaming against the likes of Netflix, Apple Inc. AAPL, Comcast Corp. CMCSA, Amazon.com Inc. AMZN, Warner Bros. Discovery Inc. WBD, Paramount Global, and others has been the focus of Chief Executive Bob Chapek as a financial catalyst for its wide range of businesses. The idea is that the so-called DTC model will accelerate and spur sales for theme parks, merchandise, traditional movies and TV, hotels and cruises.
Last week, Disney said it would launch a “limited test” of selling themed merchandise such as lightsaber collectibles and themed clothing tied to selected Disney+ shows and movies like “Star Wars,” “Black Panther” and “Frozen” for about a week. Market Watch