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Disney’s streaming platform set to take on new advertising level of competition
Rana AdamDecember 10, 2022
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Walt Disney’s new advertising-based (DIS) subscription tier for Disney+ subscribers is expected to bolster the streaming platform’s competitive edge, especially given the positive investor and user response to the company-funded plan. advertisement from Netflix (NFLX) published last month. Disney began offering the new service on Thursday, with more than 100 advertisers on board to help the fledgling streaming platform reach profitability by 2024. However, the new offering was designed by former CEO Bob Chapek , who was kicked out of the company last month. amid heavy losses for the streaming division. Now, with CEO Bob Iger back at the helm, the Club is looking to see how the Disney veteran will put his stamp on streaming and what deals he will prioritize. Disney+ subscribers now have the option of the basic Disney+ platform with ads, for $7.99 per month, or the premium option for $10.99 per month without ads. The streaming service also offers packages that include Hulu and ESPN+. In a cautionary tale, cable news network CNN shut down its streaming service, CNN+, in April after just a month. The move came amid a company and management shake-up. Creating and growing an industry-leading streaming service required Disney to incur high costs along the way. The entertainment giant has been spending to produce new content to appeal to existing viewers and attract new subscribers, a key metric analysts review when assessing streaming’s growth potential. The tactic worked, as Disney+ subscribers soared to 235 million last quarter, surpassing rival Netflix’s 223 million subscribers over the same period. However, content production costs make up about 70% to 80% of Disney’s total direct-to-consumer revenue, according to a recent memo from MoffettNathanson, which gnawed at profitability. Last quarter, Disney’s streaming division suffered a loss of $1.47 billion. Management said it still expects content spend to be around $30 billion in fiscal 2023, which is consistent with what the company spent last year, but expects losses to subside by the first quarter of fiscal 2023. At the same time, Netflix’s success with its new ad-tier platform could signal a more profitable path for Disney. On Friday, Wells Fargo upgraded Netflix to overweight, or buy, equal weight on the back of “upgrading” content. Bank analysts said they were “optimistic” about the streaming giant’s new level of advertising to help with churn, or the rate at which customers are abandoning the streaming service. Shares of Disney, down nearly 40% year-to-date, were trading up about 1.6% Friday afternoon at $94.06 apiece. Launching Disney+ with ads this week could be a great way to attract new cost-conscious subscribers and, therefore, stay competitive in the streaming wars. Additionally, higher subscription prices combined with advertising may be drivers that help increase profitability, helping Disney+ meet its goal of making money from streaming by FY2024. The entertainment company has shaken its balance sheet to invest in content production, but we hope to see that spending come down next year, easing the company’s debt burden and providing some relief to the stock price. . Above all, we’re eager to hear Iger’s take on the future of Disney’s streaming service, given the recent leadership change. We take comfort in the fact that Iger has been with the company for decades, making him a steady hand and an excellent operator – but we want more color from him in streaming. Disney stock has given up gains made since Iger’s return in late November. But we continue to believe Disney is an iconic brand and view the decline as a potential buying opportunity into weakness. (Jim Cramer’s Charitable Trust is long DIS. See here for a full list of stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY DUTY EXISTS, OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Robyn Beck | AFP | Getty Images
waltz disneyDIS’s (DIS) new ad-based subscription tier for Disney+ subscribers is expected to strengthen the streaming platform’s competitive edge, especially given the positive investor and user response to netflixThe ad-supported plan for (NFLX) was released last month.
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Rana AdamDecember 10, 2022
