Chart of the Week: Disney Ramps Up Content Spending

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Author: Tim Phillips

December 11, 2020

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Walt Disney Co (NYSE: DIS) had its annual investor day earlier this week and the company provided some useful insights into its strategy.

It was no surprise that a focus on Disney+ (along with its other content offerings) was a big part of it. Disney has had resounding success with its direct-to-consumer (DTC) offering.

Disney+ already has around 87 million subscribers, as of the beginning of December, while its popular Hulu service itself has around 37 million subscribers.

Expectations have been pumped up. Although the goal of reaching profitability remains the same (by FY 2024), the content expense is expected to balloon.

Throwing down the gauntlet to Netflix Inc (NASDAQ: NFLX), estimates at last year’s Investor Day saw Disney+ expecting to spend US$4 billion on content in FY 2024 (see below).

However, that estimate has now more than doubled to US$8-9 billion. Together with all its other direct-to-consumer offerings, Disney is expecting to spend a whopping US$14-16 billion on global DTC content in FY 2024. It’s a big bet on the power of content.

Can it take eyeballs (and dollars) away from Netflix and the host of other streaming competitors? The company is certainly intent on doing so but that key measure of subscriber growth is what investors should monitor as Disney’s content offerings continue to expand.

Disney content expenses

Source: Disney Investor Day presentation

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.