Disney CEO Bob Iger enters today’s earnings call with significant momentum. He beat back the Nelson Peltz-led activist investor revolt, and Disney’s stock is up nearly 30% YTD, far outpacing the market at large.
Nevertheless, Disney still must sort fundamental issues facing all legacy media firms, such as cord-cutting, diminishing returns on comic book movies, and the fragmentation of live sports rights.
In terms of audience demand, Disney remains the market leader in corporate demand share — a proxy for both long-term streaming success, and short-term licensing revenue potential.
However, Disney+ Originals have lost their luster with global audiences over the past year and a half. Star Wars and Marvel series are still highly in-demand, but not as big as the early hits like The Mandalorian and WandaVision. Percy Jackson remains the exception to the rule of being a non-Star Wars or Marvel show that broke out with audiences.
Disney+’s global streaming originals demand share has now declined for five consecutive quarters, from 10.2% in the Oct-Dec 2022 quarter to 7.9% as of Jan-Mar 2024. Over the same timeframe, Disney+’s global subscribers have ticked down from around 162M to 150M.
This demonstrable evidence of franchise fatigue suggests Disney will need more than Star Wars and MCU TV series to grow the service. Hulu on Disney+ will help cast a wider net as it has a solid reputation for critically acclaimed series, and brings an entirely different audience to the platform.
Live sports will help drive streaming success for the coming years. Disney’s ESPN is a crucial player here. However, without clear guidance on pricing and availability, Disney’s sports strategy remains all over the place. Questions about the exact roles of ESPN linear, an upcoming ESPN DTC offering, and the joint venture ‘Spulu’ have yet to be fully answered. Disney is unquestionably in a strong position in this space, but look for clarity on this issue in the call today.
It didn’t go unnoticed that last quarter’s slew of exciting but safe earnings day announcements — Moana 2, Taylor Swift, Toy Story 5 — fell into the more-of-the-same bucket. There’s no doubt Disney has the IP and goodwill to tread water with this strategy for a good long while. But until the Mouse House can prove that it has overhauled its creative process, innovated its approach to streaming, and refurbished its flywheel, major questions without clear answers will persist.
Corporate Demand Share
- Corporate demand share assesses the long-term viability of the top media companies as they look to consolidate their original content’s availability exclusively onto their own platforms, and can effectively help value a conglomerate’s legacy and library content in aggregate.
- Disney remained firmly in first place in this category in the January-March 2024 quarter.
- The market caps of both Warner Bros. Discovery and Paramount Global have plunged over the past few years, but this chart shows why major players in tech, entertainment, and finance are still interested in their libraries.
Four Quadrant Service
- A look at the demographic distribution of Disney+ and Hulu Originals shows the benefits of combining both onto the same app.
- Hulu series typically draw an older and more female audience, while Disney+ Originals (Star Wars and Marvel) cater towards younger male audiences.
- Combining these catalogs together creates the proverbial ‘four quadrant service,’ making it theoretically more appealing to both consumers and advertisers. The true test will be whether or not Disney can use creatively strategic recommendations to convince each group to sample programming from the other.
On-Platform Demand Share
- While demand for original content drives subscription growth, library content is key for customer retention, and catalog demand is a good indicator of which SVODs consumers are most likely to use as a default ‘streaming home.’
- Netflix (18.8%) has a sizable lead over the field, but a full combination of Disney+ and Hulu (25.3%), would overtake Netflix as the top streamer for all content demand with US audiences.
- A Disney+ and Hulu combination would also be more balanced out between demand for series and demand for movies. Nearly two-thirds of the demand for Disney+ content is for movies, while almost 70% of the demand for content on Hulu is for series, as a go-to streaming home of next day linear shows.
