<h2 class="wp-block-heading" id="h-topline">TOPLINE</h2>



Disney’s streaming unit beat expectations even as it shed 12 million Disney+ subscribers, according its latest quarterly earnings report released Wednesday afternoon, as the entertainment giant contends with turbulence while struggling to return profits to prior glory.



<h2 class="wp-block-heading" id="h-key-facts">KEY FACTS</h2>



Disney’s $22.33 billion of revenue and $1.03 earnings per share largely tracked consensus analyst estimates of $22.5 billion and $0.96, respectively, as tracked by FactSet.



The conglomerate’s park and linear television units continued to beef up the bottom line, as the units’ $1.1 billion and $1.9 billion in quarterly operating profit were in line with expectations, respectively, while Disney bled $512 million in its flashier direct-to-consumer media business including Disney+, ESPN+ and Hulu, far below projections of a $758 million loss.



The company reported a staggering 12 million decrease in Disney+ subscribers, though its subscriber loss in the U.S. and Canada was a milder 1%.



Disney incurred $2.7 billion in restructuring costs during the quarter in which the company concluded its round of roughly&nbsp;<a href="https://www.cnn.com/2023/05/22/media/disney-layoffs/index.html" target="_blank" rel="noreferrer noopener">7,000</a>&nbsp;layoffs globally.



Shares of Disney registered a roughly 1% in after hours trading as investors digested the mixed-bag report.



<h2 class="wp-block-heading" id="h-key-background">KEY BACKGROUND</h2>



Disney’s earnings release comes amid a turbulent stretch for the company’s stock, which is down 20% over the last five years, far underperforming the S&amp;P 500’s roughly 60% return over the timeframe. The slump comes after a brief surge in Disney’s share price as investors&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2022/11/21/disney-shares-jump-9-on-return-of-bob-igers-magic/?sh=14889bd28b2f">heralded</a>&nbsp;the November return of the company’s long-time CEO Bob Iger. But Disney’s stock is down 4% since Iger’s reclamation of the throne, well below the S&amp;P’s 13% gain during the period, as investors&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2023/05/11/disney-stock-set-for-worst-day-since-ceo-bob-igers-comeback/?sh=38001ff940da">grew impatient</a>&nbsp;with a lack of results in Iger’s cost-cutting vision to grow profits as streaming losses mounted.



<h2 class="wp-block-heading" id="h-tangent">TANGENT</h2>



Much of Disney’s bottom-line issues come as the legacy media sector grapples with a decline in the popularity of linear television: Its $1.1 billion in operating profit for its media and entertainment unit during the first three months of 2023 was down from $1.9 billion the year prior and nearly $3 billion five years ago. Overall, Disney’s operating profit during the most recent quarter was roughly a fifth less robust than it was during the same period five years ago ($4.2 billion).



<h2 class="wp-block-heading" id="h-what-to-watch-for">WHAT TO WATCH FOR</h2>



How Disney’s&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2023/08/08/penn-entertainment-sells-barstool-sports-back-to-founder-dave-portnoy-in-deal-rebranding-sportsbook-as-espn-bet/?sh=52dfb7d968d2">$1.5 billion</a>&nbsp;agreement with sports gambling operator PENN Entertainment announced Tuesday – and subsequent launch of an ESPN-branded sportsbook – will drive sales at Disney’s sports segment. Iger&nbsp;<a href="https://www.cnbc.com/2023/07/13/disney-open-to-finding-espn-strategic-partner.html" target="_blank" rel="noreferrer noopener">said</a>&nbsp;last month the company is open to offloading an equity stake in ESPN.



<h2 class="wp-block-heading" id="h-crucial-quote">CRUCIAL QUOTE</h2>



Even amid entertainment companies’ challenges as consumer preferences shift, Disney “should survive and thrive in this environment due to its diversification, multiplatform media offerings, large vault of content, and pricing premium,” Daiwa analyst Jonathan Kees proclaimed in a Tuesday note previewing earnings.



<h2 class="wp-block-heading" id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/brianbushard/2023/08/08/penn-entertainment-sells-barstool-sports-back-to-founder-dave-portnoy-in-deal-rebranding-sportsbook-as-espn-bet/" target="_blank" rel="noreferrer noopener">MORE FROM FORBESPenn Entertainment Sells Barstool Sports Back To Founder Dave Portnoy In Deal Rebranding Sportsbook As ESPN BETBy&nbsp;Brian Bushard</a>



<a href="https://www.forbes.com/sites/dereksaul/2023/05/11/disney-stock-set-for-worst-day-since-ceo-bob-igers-comeback/" target="_blank" rel="noreferrer noopener">MORE FROM FORBESDisney Stock Set For Worst Day Since CEO Bob Iger&#8217;s ComebackBy&nbsp;Derek Saul</a>



<a href="https://www.hollywoodreporter.com/business/business-news/disney-apple-deal-1235559416/" target="_blank" rel="noreferrer noopener">THE HOLLYWOOD REPORTERA Disney Sale to Apple? Don&#8217;t Count It Out This Time</a>

Disney plus : Illustration

Disney Plus Subscribers Dwindle — But Streaming Unit Beats Estimates

A controversial movie release and weaker-than-anticipated growth projections for the third quarter have barely stunted Netflix&#8217;s <a rel="noreferrer noopener" href="https://www.forbes.com/companies/netflix" target="_blank">NFLX</a> <a href="https://www.forbes.com/companies/netflix">0.0%</a> surge this year. Though they took a small hit amid the broader market&#8217;s September correction–after an all-time Netflix high in late August–shares of the Los Gatos, California-based firm are once again nearing peak levels. With the firm set to report earnings Tuesday after the market close, here are five numbers that show just how much the firm has dominated entertainment in the pandemic age.



<h3 class="has-text-align-center wp-block-heading">$235 Billion</h3>



That&#8217;s Netflix&#8217;s market capitalization the day before it&#8217;s set to release third-quarter earnings. It&#8217;s up nearly $100 billion in 2020 alone, making the 23-year-old streaming giant one of the 20 largest companies on the S&amp;P 500 by market cap–ahead of even media mainstays like Walt Disney <a rel="noreferrer noopener" href="https://www.forbes.com/companies/walt-disney" target="_blank">DIS</a> <a href="https://www.forbes.com/companies/walt-disney">-2%</a>, Comcast <a rel="noreferrer noopener" href="https://www.forbes.com/companies/comcast" target="_blank">CMCSA</a> <a href="https://www.forbes.com/companies/comcast">-2.7%</a> and AT&amp;T.



<h3 class="has-text-align-center wp-block-heading">60%</h3>



Netflix shares have soared more than 60% since the beginning of the year. To compare, the S&amp;P 500 is up just 6.5% in 2020. The firm&#8217;s billionaire cofounder and CEO, Reed Hastings, has gotten nearly $2 billion during the pandemic. The 60-year-old, who launched Netflix as a DVD subscription service in 1997 and owns roughly 1% of its shares, is now worth about $5.4 billion.



<h3 class="has-text-align-center wp-block-heading">195 Million</h3>



That&#8217;s the number of paid subscribers analysts expect Netflix will report on Tuesday, up 2.5 million quarter to quarter and in line with the firm&#8217;s latest guidance. Netflix said in July that it added 26 million subscribers during the first half of the year (10 million in the first quarter and nearly 16 million in the second) as homebound consumers facing government-mandated quarantine orders turned to the streaming giant–and away from movie theaters and live shows–for entertainment. That increase could even prove conservative, noted investment research firm CFRA on Monday, reiterating its buy rating on Netflix shares and adding that the firm could be bolstered by an increase in subscribers from international markets.



<h3 class="has-text-align-center wp-block-heading">$6.4 Billion</h3>



Analysts are expecting Netflix will pull nearly $6.4 billion in third-quarter revenues, up more than 20% from the same period last year. The company&#8217;s also expected to report earnings of about $2.13 per share, down from $1.47 per share last year on heightened costs amid the pandemic.&nbsp;



<h3 class="has-text-align-center wp-block-heading">$670</h3>



That&#8217;s the price target Bank of America <a rel="noreferrer noopener" href="https://www.forbes.com/companies/bank-of-america" target="_blank">BAC</a> <a href="https://www.forbes.com/companies/bank-of-america">-2.1%</a> issued on Friday for Netflix, up nearly 17% from a prior target of $575 and representing the highest Netflix price target on Wall Street. Despite near-term uncertainties around second-half subscriber growth–and a <a href="https://www.forbes.com/sites/carlieporterfield/2020/10/12/netflixs-sarandos-defends-cuties-calling-the-controversial-film-misunderstood/">highly criticized</a> movie release, Bank of America said it continues to see the acceleration in Netflix subscriber growth during the first half of the year as a &#8220;permanent benefit.&#8221; Netflix&#8217;s average price target from 39 analysts covering its stock is about $527–within 1% of current prices.



-By Jonathan Ponciano, Forbes Staff

Netflix

5 Big Numbers That Show Netflix’s Massive Growth Continues During The Coronavirus Pandemic

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How Netflix’s Reed Hastings Rewrote The Hollywood Script

TOPLINE Netflix is one of the few companies actually thriving during the coronavirus, hitting an all-time high in the market Thursday after becoming more valuable than rival entertainment giant Disney.



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="960" height="735" src="https://www.forbesafrica.com/wp-content/uploads/2020/04/Tiger-King.jpg" alt="" class="wp-image-44391" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/04/Tiger-King.jpg 960w, https://cms.forbesafrica.com/wp-content/uploads/2020/04/Tiger-King-300x230.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/04/Tiger-King-600x459.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/04/Tiger-King-768x588.jpg 768w" sizes="(max-width: 960px) 100vw, 960px" /><figcaption>&#8216;Tiger King&#8217; has been a huge boon for Netflix, drawing more than 34 million viewers in its first 10 days on the platform, according to Nielsen. NETFLIX</figcaption></figure></div>



<h2 class="wp-block-heading">KEY FACTS</h2>



The streamer’s stock climbed 5% by midday, after closing at a record price of nearly $427 per share on Wednesday.



With viewers turning to hits like&nbsp;<a href="https://www.forbes.com/sites/arielshapiro/2020/04/08/34-million-people-watched-tiger-king-in-its-first-10-days-on-netflix/#56e0cff52a9a">true-crime documentary&nbsp;Tiger King</a>&nbsp;and comfort-food reruns like&nbsp;The Office&nbsp;and&nbsp;Cheers,&nbsp;<a href="https://www.forbes.com/sites/arielshapiro/2020/03/23/exclusive-disney-sees-huge-subscription-spike-as-homebound-audiences-clamor-for-content/#7f50f02e17c4">Netflix is seeing a spike in new subscriptions</a>, according to streaming analytics firm Antenna.



Aside from increased viewership, Netflix is seeing another benefit from the crisis: like the rest of Hollywood, it has had to halt production, says Lightshed partner and analyst Rich Greenfield, freeing up its cashflow as it accumulates revenue.



What’s good for Netflix is also good for its&nbsp;<a href="https://www.forbes.com/profile/reed-hastings/#73a62bcd2782">cofounder and CEO Reed Hastings</a>&nbsp;— his net worth is now $4.9 billion, a $1.2 billion increase since the end of March.



<h2 class="wp-block-heading">BIG NUMBER</h2>



$194 billion. That is how much Netflix&nbsp;<a href="https://www.forbes.com/companies/netflix">NFLX</a>&nbsp;is now worth, having increased its market value more than $50 billion so far this year. Disney&nbsp;<a href="https://www.forbes.com/companies/walt-disney">DIS</a>, having been hit particularly hard by the coronavirus, is valued below $184 billion, down from nearly $258 billion at the end of 2019. Disney and Netflix are two of the heaviest hitters in entertainment, but they have opposite approaches. While Netflix is entirely dependent on paid subscriptions for revenue, Disney is much more varied, as reliant on tourism and merchandise sales as it is on the content it puts out. While that diversity has traditionally been its strength, it has become a liability as&nbsp;<a href="https://www.forbes.com/sites/arielshapiro/2020/04/14/saving-disney-iger-returns-as-coronavirus-batters-the-company-on-all-sides/#37412867e64f">the pandemic forces Disney to shut down theme parks and delay film releases</a>.



<h2 class="wp-block-heading">WHAT TO WATCH FOR</h2>



While that pause in production may be good for Netflix’s bottom line now, it could result in significantly less new content in the fall than planned. Even so, Netflix may still be better off than its competitors. “The reality is they have much more content in the pipeline than anyone else right now,” says Greenfield.



&#8211;<a href="https://www.forbes.com/sites/arielshapiro/">Ariel Shapiro, </a>Forbes Staff, <a href="https://www.forbes.com/business">Business</a>

gettyimages-1215343881-594×594

Netflix Stock Hits Record High, Is Now Worth More Than Disney

Topline:&nbsp;In order to continue global growth, ByteDance (parent company of the wildly popular social media app TikTok) will reportedly launch a&nbsp;<a rel="noreferrer noopener" href="https://www.ft.com/content/ffaed23a-07dd-11ea-a984-fbbacad9e7dd" target="_blank">music streaming service</a>&nbsp;as soon as next month and is potentially exploring ways to&nbsp;<a rel="noreferrer noopener" href="https://www.wsj.com/articles/tiktok-looking-at-ways-to-shake-off-its-ties-to-china-11574073001?mod=djem10point" target="_blank">remake its image</a>&nbsp;in advance of a rumored 2020 public offering.&nbsp;



<ul><li>The&nbsp;Financial Times&nbsp;reported Sunday that ByteDance is in talks to secure global licensing rights from Warner Music, Universal Music and Sony Music, the world’s largest record companies.&nbsp;</li><li>ByteDance’s still-unnamed music streaming service will reportedly cost less than $10 per month, undercutting monthly subscription fees charged by rivals Spotify and Apple, and will kick off with initial launch markets in Brazil, Indonesia and India; ByteDance declined to comment.</li><li>Those countries could be a tough sell⁠—according to a May 12&nbsp;<a href="https://www.bloomberg.com/news/articles/2019-05-20/tiktok-owner-to-challenge-spotify-and-apple-with-music-service" target="_blank" rel="noreferrer noopener">Bloomberg report</a>, paid music subscriptions are mainly a Western phenomenon, while the most popular music apps in Asia are YouTube and Tencent’s QQ Music, both of which are free.</li><li>Meanwhile, the&nbsp;<a href="https://www.wsj.com/articles/tiktok-looking-at-ways-to-shake-off-its-ties-to-china-11574073001?mod=djem10point" target="_blank" rel="noreferrer noopener">Wall Street Journal</a>&nbsp;reported Monday that Beijing-based ByteDance, facing growing concern from U.S. lawmakers over its user-<a href="https://www.wsj.com/articles/u-s-launches-national-security-review-of-video-app-tiktok-11572641964?mod=article_inline" target="_blank" rel="noreferrer noopener">data storage</a>&nbsp;and content&nbsp;<a href="https://www.theverge.com/2019/10/9/20906971/tiktok-censorship-china-bytedance-musically-marco-rubio-senate-mnuchin-cfius-treasury" target="_blank" rel="noreferrer noopener">censorship</a>&nbsp;practices, is searching for ways to distance itself from its Chinese roots.</li><li>Potential rebranding moves include relocating its operations to Singapore and renaming TikTok, which the company denied, according to the&nbsp;WSJ.</li><li>Both the&nbsp;FT&nbsp;and&nbsp;WSJ&nbsp;reported ByteDance was aiming to IPO sometime next year, which ByteDance also denied to both outlets.&nbsp;</li></ul>



Big number:&nbsp;$78 billion. That was ByteDance’s last reported valuation, making it one of the&nbsp;<a rel="noreferrer noopener" href="https://www.cnbc.com/2019/09/30/tiktok-owner-bytedances-first-half-revenue-better-than-expected-at-over-7-billion-sources.html" target="_blank">most valuable</a>&nbsp;startups in the world.



What to watch for:&nbsp;When ByteDance’s music streaming service actually launches. And if it moves the needle on paid music subscriptions in Asia. China’s Tencent has 800 million music users, but&nbsp;<a href="https://www.ft.com/content/ffaed23a-07dd-11ea-a984-fbbacad9e7dd" target="_blank" rel="noreferrer noopener">less than 5%</a>&nbsp;of them pay for it.&nbsp;



Key background:&nbsp;TikTok made a name for itself as the first Chinese social network to achieve success in the U.S with over 100 million Americans as registered users. It surged in popularity this year as teens flock to the app to make lighthearted pranks, comedy sketches and lip-syncing videos. It’s also the third-most-downloaded app in Apple’s App Store, but it came at a price. According to the&nbsp;WSJ, ByteDance poured&nbsp;<a rel="noreferrer noopener" href="https://www.wsj.com/articles/tiktoks-videos-are-goofy-its-strategy-to-dominate-social-media-is-serious-11561780861?mod=article_inline" target="_blank">$1 billion&nbsp;</a>into advertising and flooded rivals Facebook and Instagram with ads.&nbsp;



&#8211; <a href="https://www.forbes.com/sites/lisettevoytko/">Lisette Voytko</a>

gettyimages-1073256686-594×594

TikTok Owner ByteDance Continues Expansion Efforts With Music Streaming And Possible Rebrand

At a board retreat in Orlando, Florida, in 2006, a pair of senior Disney executives predicted a seismic shift in the media landscape — one fueled by consumers who would enjoy unprecedented access to content. Their plan? Amass strong enough entertainment brands and franchises to grab the attention of viewers awash in choices.



That insight, part of a “Disney 2015” presentation by its CFO at the time, Tom Staggs, and corporate strategist Kevin Mayer, was delivered a dozen years before Netflix briefly surpassed Disney as the world&#8217;s most valuable media company in 2018. It would inform an aggressive buying binge, in the mold of the Pixar Animation Studios deal of 2006, that would roll up some of the world&#8217;s most recognizable entertainment brands under the Disney banner — Marvel Entertainment, Lucasfilm and 21st Century Fox. These form the foundation of the coming Disney+ streaming service, which CEO Bob Iger will discuss in detail at an investor day Thursday on Disney’s manicured studio lot in Burbank, California.



Analysts say Disney’s library of blockbuster films and popular TV shows, bolstered by its recent acquisition of Fox’s film and television assets, give it a competitive advantage that should help attract subscribers — even at a time when established rivals, like Netflix and Amazon Prime Video, have gained a substantial head-start.



Disney and Fox together account for 47% of the top 100 films of all time, based on domestic box office. That’s more than double the nearest competitor, Warner Bros., with 20 hit movies. The combined Disney and Fox libraries also command the largest share of the 100 most popular TV shows, as ranked by IMDB. &nbsp;



Disney plans to mine its Pixar, Marvel and Star Wars franchises for original shows that will appear exclusively on the streaming service, including a live-action Star Wars TV series&nbsp;The Mandalorian, an animated series&nbsp;Monsters At Work, with Billy Crystal and John Goodman reprising their roles as Mike and Sully, and a series based on the Marvel archer character Hawkeye, starring Jeremy Renner.



“The amalgamation of Disney’s and Fox’s libraries will create an unparalleled combination of great, hard to recreate and memorable content,” said media analyst Michael Nathanson.



Nathanson predicts Disney+ will attract 7.1 million subscribers in its first year, growing to nearly 24 million by the end of fiscal 2022.



A question remains about whether a content company like Disney will be able to match Netflix’s technological prowess. The Los Gatos-based streaming service has been able to draw from its vast trove of user data to deliver recommendations that keep its 139 million global subscribers watching, month after month, and inform programming decisions.



Disney has stumbled on previous digital endeavors, such as DisneyLife, a U.K.-based streaming service that launched in 2015, charging £10 a month for access to some 400 movies, 4,000 TV episodes as well as songs and books. Despite a price drop, it has failed to catch on with subscribers, according to numerous published accounts.



The success of Disney+ is something Iger is staking his legacy on, describing it, during a recent investor call, as “our number one priority.”



That’s a major strategic shift for Disney, which had enabled the growth of Netflix through lucrative multi-year deals, such as the one in 2012 that gave the streaming service exclusive TV rights to new and catalog films, and another, the following year, that handed Netflix access to Marvel’s muscular superhero roster — with ABC Television Studio developing original series based on comic book characters Daredevil, Jessica Jones and Luke Cage.



Netflix became the de facto syndicator for a number of TV shows, noted Nathanson.



The inescapable toll of cord-cutting, fanned by popular services like Netflix, caused a re-calibration inside the Mouse House. Disney’s traditional cash cow, ESPN, has shed 13 million domestic subscribers from its peak in 20013, and Disney Channel also has lost millions of pay TV viewers.



Iger shifted course in 2017, announcing that Disney would pull its content from Netflix and launch its own service in 2019. That August, the company invested $1.58 billion to acquire a majority ownership of BAMTech, the MLB-founded video streaming technology that will power Disney+. That same year, in December, Disney announced its ground-breaking deal to acquire much of Fox, a move that would position Disney as the world&#8217;s preeminent entertainment company — and bulk up its library as it prepares to do battle with Netflix.



The $71.3 billion Fox deal, which closed in March, reunited the X-Men and Fantastic Four with the rest of the Marvel universe, added&nbsp;The Simpsons&nbsp;and&nbsp;Ice Age&nbsp;to Disney and Pixar’s animated roster, and brought James Cameron’s four sequels to the box-office blockbuster Avatar under the Disney banner. It also gave Disney a controlling interest in Hulu, a streaming service jointly owned with Comcast’s NBCUniversal and AT&amp;T’s WarnerMedia, which has amassed 25 million subscribers.



Disney announced a sweeping corporate reorganization in March of 2018, to consolidate its streaming operations under the executive who’d overseen its major acquisitions, Kevin Mayer. Previously, efforts had been fragmented among the different business units, with the film and television groups pursuing different digital strategies, say former insiders.



“Depending on how aggressively Disney intends to invest, and their willingness to accept compressed profit margins, the company has a chance to become a meaningful competitor to Netflix and Amazon’s Prime Video,” wrote Brian Wieser, a long-time media analyst who now oversees business intelligence for GroupM, one of the world’s largest media buyers.



-Dawn Chmielewski; Forbes Staff

Tag: Streaming Service

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