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Disney (DIS) Announces Price and Launch Date for Disney+

Zacks Equity Research

Disney DIS put all speculations to rest by announcing the price and launch date for its most-awaited streaming service, Disney+.

The service will cost $6.99/month or $69.99/year, which is lower than Netflix NFLX, as promised by the company. Notably, Netflix’s basic plan costs $8.99/month. Disney+ price is also lower than Wall Street analysts’ average estimate of $7.5/month, per Reuters.

Disney+ will be first available to U.S. customers on Nov 12, 2019 and on a global basis after 2019. North America will be the first to get the service in first-quarter 2020, followed by Western Europe in second-quarter 2020, Latin America in first-quarter 2021 and Eastern Europe in fourth-quarter 2021.

Notably, Disney+ will be available on Roku ROKU, Sony’s PlayStation 4, and other smart devices like TVs, mobiles and tablets.

The Walt Disney Company Revenue (TTM)

The Walt Disney Company Revenue (TTM) | The Walt Disney Company Quote

Disney+, Hulu Aim Big

Disney is betting big on Disney+. The company estimates to reach about 95% of its audience at the launch of Disney+. Additionally, Disney is looking to reach about 100 million households globally via working with “Disney Cruise Lines, Disneyland, Walt Disney World, Hulu, ESPN, and Pixar,” to name a few.

Per Reuters, Disney plans to hit about 60-90 million subscribers for Disney+ and around 40-60 million for Hulu by 2024. While Disney+ is expected to be profitable by 2024, Hulu may be profitable by 2023 or 2024 in the United Sates.

Hulu, which was the fastest growing video service in the United States, per Disney, added 8 million subscribers in 2018, taking the total count to 25 million, of which 23 million were paid subscribers. Hulu’s subscriber base is expected to grow further, courtesy of price cut of its most popular plan and Disney’s plans to take Hulu international.

Strong Content Slate: Key Catalyst

Disney+ will leverage the company’s existing IP and investments in original content. The company’s existing and upcoming film, and TV shows from Disney, Pixar, Marvel, Star Wars and National Geographic will be part of the service.

Additionally, the service will include some of the originals such as Lady and the Tramp, Encore and The Mandalorian. Notably, Disney plans to launch more than 35 original series, and 10 original movies and specials in 2019. Further, it plans to increase the number of original series to 50 by 2024.

Rising Costs & Competition to Hurt

Disney is spending heavily to sustain competition from the likes of Netflix, Amazon and Apple AAPL. The company is cited as the biggest spender, with an estimated $23.8 billion or $16.4 billion without sports content costs for 2019, per RBC research stated by Variety. Netflix closely follows Disney in this regard, as it is expected to spend $15 billion in 2019, per Variety.

Although, Apple’s spend for 2019 is miniscule, $2 billion, per Variety, when compared to Disney and Netflix its deals with top Hollywood talent is something to look out for, when the service launches this fall.

Disney’s second-quarter fiscal 2019 operating income will have a negative impact of $200 million due to increasing costs. The company is also expected to sacrifice $150 million of licensing revenues in 2019, after it cancelled licensing deal with Netflix.

Disney currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Roku, Inc. (ROKU) : Free Stock Analysis Report
 
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