Disney Overtakes Netflix to Become Biggest Streamer

August 13, 2022

The magic is back for the Mickey Mouse Company as The Walt Disney Company (NYSE: DIS) reported robust financial results for its latest Q3 FY2022 earnings.

The world’s largest entertainment company, Disney, has edged past streaming giant, Netflix Inc (NASDAQ: NFLX), with a total of 221 million streaming customers

That means it has become the biggest streamer in the world.

The Mouse House staked its future on building a streaming service to rival Netflix in 2017 as audiences moved to online viewing from traditional cable and broadcast television.

In its Q3 FY2022, Disney added 14.4 million Disney+ customers, beating the consensus of 10 million addition as its latest Star Wars series, Obi-Wan Kenobi, and Marvel’s Ms Marvel, attract new subscribers.

Disney has range of offerings

Combined with Hulu and ESPN+, Disney said it had 221 million streaming subscribers at the end of June quarter. Netflix said it had 220.7 million streaming subscribers.

Overall revenue for Disney rose 26% from a year earlier during the quarter to US$21.5 billion while adjusted earnings per share (EPS) was up 36% to US$1.09 from a year earlier as visitors packed its theme parks.

Operating income more than doubled at the Parks, Experiences and Products division to US$3.6 billion.

Streaming losses, however, dragged Disney’s media and entertainment unit to record a decline of 32% in profit to US$1.4 billion.

Disney+ Price to increase by 38%, offers plans with ads

Disney will also be following its rivals by increasing prices and offering an ad-supported version of Disney+.

In December, Disney will raise the price of its existing ad-free version of Disney+ in the US by 38% to US$10.99. It will also introduce a version with ads at the old US$7.99 price.

Disney’s Chief Financial Officer, Christine McCarthy, told analysts that this is the peak year for Disney+ losses. That means the company will need to show a path towards breakeven in the next fiscal year.

With the price increase, and ad-supported tier, this is be feasible for Disney.

Growth opportunities overseas

Disney has also been gaining market share even as Netflix is struggling to add more subscribers.

This is seen both in the US and in international markets.

There is still room for growth in international markets for Disney+, where it is still rolling out its services and adding new customers.

Disney may have missed the pandemic-driven demand wave for streaming services in the international market.

However, the rollout of its ad-supported tier in international markets (beginning next year), as well as its value proposition as a world class content provider could remain the differentiating factors.

There is more to streaming with Disney and as the picture of the company continues to improve in the post-pandemic world, strong growth on the streaming front is an added bonus.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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