Disney (DIS – Get Report) is set to create the streaming world this week with its highly anticipated Netflix (NFLX – Get Report) competitor.
There is a lot we do not know about Disney's new Disney + direct-to-consumer streaming service – namely price, a specific start date and what original content Disney will offer along with its own TV and movie library. We also don't know how it can be bundled with content from Disney's other streaming features, ESPN + and Hulu. But the new service can prove tempting to string cutters who will soon have more choice than ever in where to get the content.
Shares in Disney increased 0.6% on Wednesday in pre-trading and 6.6% date.
Disney is planning to preview Disney + on an investor day this Thursday, making it the newest player for an increasingly popular streaming services market. Netflix is the dominant player, at 139 million subscribers from its latest earnings report. Apple (AAPL – Get Report) aims to leverage its 1.4 billion installed base in Apple TV channels and TV +, the recently announced a la carte streaming services. AT&T is (T – Get Report) WarnerMedia is expected to launch its own service this year, and of course, Amazon (AMZN – Get Report) Prime Video has been folded into its Prime subscription for years.
On Wednesday morning, BMO analyst Daniel Salmon upgraded his rating to Disney to outperform the market, based in part on Disney + optimism. "We continue to look like Netflix and Amazon more than Disney, but are comfortable recommending all three, as we expect everyone to be long-term winners in global streaming," said salmon.
BMO's upgrade followed one on Tuesday from Cowen analyst Doug Creutz, quoting the strength of Disney's content pipeline, claiming that the company could ultimately realize "Netflix-like valuations" in its streaming business. "We believe that the Disney + DTC service (direct to consumer) is well positioned to have an extremely strong launch beyond the consensus's expectations," Creutz wrote.
Based on what we now know about Disney +, an important drawing will be Disney's search for brands and franchises such as Marvel, Pixar, Star Wars and National Geographic, which will be offered along with the original content.
Whether Disney + will brace meaningful market share from Netflix and other players over time, or coexist as another streaming option, is another question.
Costs will be an important factor in how Disney + stacks up.
Pricing is not yet known for Disney +, or Apple's TV +, or the others will launch in the coming quarters. Netflix hiked its awards this year – to $ 9 from $ 8 for a basic plan, $ 13 from $ 11 for its most popular standard plan and $ 16 from $ 14 for its premium plan – and many analysts wonder that Disney will sign Netflix on Disney + pricing.
Finally, customers can come to a point where they have to choose and choose what content they really want for their money. And we do not yet know how it will blow out among the various players.
"With the arrival of new big named competitors in the [subscription video on demand/direct-to-consumer TV] space, we'll learn a lot about the price ceilings and floors for these services," said Michael Greeson, president of The Diffusion Group, TheStreet this month.
"Much will depend on the composition of the new services (for example, how much content Disney packs into the subscription) according to their price. If Disney comes in around $ 9 / month, it offers a robust library and slate of originals, which will make it more difficult for Netflix, "he said.
Meanwhile, Morgan Stanley analyst Benjamin Swinburne recently raised his Disney + subscriber forecasts, assuming 70 million subscribers by 2022 for Hulu, Disney + and ESPN + combined, citing a survey showing that 40% of US adults expressed interest for Disney + at a hypothetical price point of $ 8 per month.
"On a US broadband base of 100mm households, this suggests over 40 [million] subscriber options in the United States alone," said Swinburne.
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