Disney’s streaming future is strong enough to drive stock higher, despite $4.72B loss

streaming future

What’s it mean when a media company reports $4.72 billion in net quarterly losses, but its stock price goes up for days following the news? In Walt Disney Company’s case, it means that investors believe the company has a handle on its future and, in this case, that its streaming future (maybe present?) is bright.

Disney execs have been calling its streaming business the most important part of its future for more than a year. CEO Bob Chapek reiterated that during the company’s earnings call Tuesday, promising Disney would take “even more innovative and bold initiatives as we continue to grow the business.”

Disney’s streaming services, Disney+ (60.5 million subs), ESPN+ (8.5 million subs), Hulu (32.1 million subs plus another 3.4 million for Hulu + Live TV) totaled more than 100 million subscribers as of Tuesday.

The 60.5 million Disney+ subs Chapek announced during the company’s earnings call is a number it projected to reach after five years, not three quarters.

That positive streaming growth and the future Chpek painted for the business over the next year or so combined to push Disney’s stock up 5% in after-hours trading Tuesday to $123,

to $127.61 Wednesday and it was over $130 on Thursday, its highest since the COVID-19 pandemic began.

A rebound despite the quarterly loss, despite the lack of revenue from its parks, despite the movies it’s not premiered during the global shutdown and despite ad revenue its lost from its traditional broadcast business.

Mulan moves to Disney+… for $30; that’s a steal for consumers

Disney also announced that it would be moving it’s $200 million tentpole animated feature, Mulan to Disney+. Disney has been eager to launch the film for months, but the pandemic got in the way.

Rather than waiting for a launch that likely could be delayed until 2021 – when there’s likely to be a glut of blockbuster releases – it’s going direct-to-consumer (D2C).

To watch it, you’ll have to be a Disney+ subscriber and be willing to pay $30.

At that price, it’s a bargain for a family of four that likely would have had to pay $48, on average, not to mention the cost of refreshments and the ability to pause the film.

The film debuts Sept. 4 and there’s likely to be another surge of signups to the streaming service (a la when Disney released Hamilton on Disney+ in July), and a huge audience for Mulan. After all, Trolls World Tour brought in more than $100 million in revenue for Universal Pictures when it went D2C in April on Amazon Prime, Apple TV, Fandango Now, Google Play, and YouTube, renting for $20.

By the way, a couple of weeks ago, Interpret Vice President Brett Sappington and talked about the future of premium video on-demand (PVOD) during a video strategy forum. You can watch it here.)

Theatrical window is under siege

Meanwhile, during this morning’s Q2 earnings call with ViacomCBS, CEO Bob Bakish said theatrical windows, which normally last 70 to 90 days, will “probably shorten” as a direct result of the COVID-19 pandemic.

ViacomCBS also has gone D2C with some content and likely will continue, although not to the extent Disney already has. The company has moved The SpongeBob Movie: Sponge on the Run to PVOD and plans to later stream it on CBS All Access. Netflix has picked up international rights (except for China) to the film.

It also has pushed other content to streamers like Netflix (Lovebirds), and Bakish noted studios were in “sort of a COVID rules phase of the business right now. Studios, including Paramount, are doing things they wouldn’t normally do because theaters remain closed.”

While he expects most releases will remain with theaters, theatrical windows “will probably shorten” and some of these new monetization paths, including strategic ones and others” will remain.

Universal Pictures, meanwhile, already has agreed to a deal with AMC Theaters for some movies to see a limited theatrical play of 17 days.

In terms of Disney’s plans, meanwhile, Chapek wouldn’t rule out more PVOD trials.

“We’re looking at Mulan as a one-off in terms of – you know, as opposed to, say, trying to say that there’s some new business windowing model that we’re looking at. But, he added, “we find it very interesting to be able to take a new offering, our premier access offering, to consumers at that $29.99 price and learn from it and see what happens not only in terms of the uptake of the number of subscribers that we get on the platform but the actual number of transactions on the Disney+ platform that we get on that PVOD offering.”

Hulu won’t be launching globally

While Disney has seen strong growth with its Hulu VOD service (don’t ask about Hulu + LIVE TV, virtual MVPDs – a.k.a. Pay-TV 2.0 – really aren’t what consumers are looking for), the brand isn’t going to be traveling overseas.

Instead, Disney will hook its wagon to Star, which will roll out in the early part of 2021.

“It’s important to look at the differences in how we plan on going into the market,” Chapek said. “And the first thing is that Hulu aggregates third-party content while this will not. This will be rooted in our own content, from ABC Studios, Fox TV, FX, Freeform, Searchlight, and 20th Century.”

And, Chapek said, Hulu “has no brand awareness outside of the U.S.”

More importantly, Hulu has no content licensed to it internationally.

“We think that the Star brand itself, in terms of its offerings, we’ve got a utility here. We’ve got a utility that is enabled on all Disney platforms,” Chapek said. Disney will use the same streaming platform across both Disney+ and Star. That, he said, gives it the capability to evolve on both platforms at the same time.

The bottom line

Disney has successfully rolled out a winning OTT play, and it’s so far ahead of its own subscriber projections that it has the luxury of experimenting with its model.

In terms of Mulan, for example, it’s going to be able to see just how big a box office it can corner with a PVOD release… and to see what a tentpole feature does to subscriber numbers.

If Hamilton was any indication, the gains will be significant and, perhaps, more long term. Mulan will introduce a lot of kids to the other charms Disney+ has to offer, making it a lot tougher to churn away from.

As to Hulu + LIVE, TV, does having a little more than 3 million subscribers make it “must have” for Disney? Probably not. It’s likely not paying for itself and has seen less-than-stellar subscription growth – even during COVID-19. Could it end up on the cutting room floor?

It’s become more evident that, aside from sports, linear TV is losing its luster with viewers, and that, combined with Disney shutting down some 20 channels in EMEA and APAC this year with the intention of taking them D2C, may be a good indicator of its future.

As to sports, Chapek said Disney understands their value and he said Disney is “absolutely” looking for a stronger D2C proposition for ESPN.

Stay tuned… there’s plenty more to come. And, stay well.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn