Disney+ surpasses 50M paid subscribers globally

Disney's stock is jumping, after announcing its streaming service Disney+ surpassed 50 million paid subscribers worldwide. CFRA Research Senior Analyst Tuna Amobi joins Yahoo Finance’s Seana Smith to discuss.

Video transcript

SEANA SMITH: One of the leaders in the Dow today is Disney. Disney stock up just over 5% so far. And the move to the upside comes after Disney+ service revealed the fact that it has more than 50 million subscribers. That's almost twice as many as the company had reported just two months ago.

So here to talk more about this, I want to bring in Tuna Amobi, CFRA Research Senior Analyst. And Tuna, thanks for joining us this afternoon. It was pretty big numbers that we got out of Disney, just in terms of the success that they're seeing in Disney+ so far. What did you think of the numbers?

TUNA AMOBI: You know, I have to tell you, those numbers were actually better than we expected. And going into this COVID-19, you know, extended stay, we figured that the streaming platforms were going to be one of the major beneficiaries of a spike in in-home viewing with all this social distancing, et cetera.

So Disney+ having launched last fall, I think they were really off to a terrific start. These numbers we're getting globally as they continue to launch in Western Europe and a host of other international markets yet to come, I think, really tells us that they are far ahead of the pace that they have set out. If you remember in April, when they had the analyst day last April, they set out projections of 60 to 90 million globally within five years. Now, 50 million in just five months, I think, seems on track to obliterate those five-year projections.

So if anything, net-net Disney+ should be a net beneficiary. I should also add that some of the numbers that we're getting from Nielsen in terms of the spike in streaming viewership, Disney is right there in the mix of potential beneficiaries.

That being said, last week the company had put out some guidance regarding COVID-19 and potential impacts on its theme parks, the film and television. So there has been some significant disruption. We should really temper expectations going into this next earnings.

That being said, I think investors can take some comfort that Disney+ should be a net beneficiary and should provide a bright spot when they report earnings.

SEANA SMITH: Yeah. Tuna, I wanted to go off on that, just in terms of we've got this huge number when it comes to Disney+. But how does that news compare to the fact that Disney still has their theme parks closed around the world? Movie theaters are still closed, just in terms of getting out their new content, their new movies. I mean, how do you think that will all shake out for Disney, at least in the short-term?

TUNA AMOBI: In the short-term, I think the impact in terms of the numbers is going to be significant. I mean, there's no sugarcoating that. Remember, the streaming business is still a loss-making business, and will remain so for quite some time. So as much as they're adding all these subscribers, they're still spending heavily on content and marketing.

But when you have theme parks closed now for weeks and potentially months, you're talking about hundreds of millions dollars of a hit in operating income. You're kind of losing a significant amount of leverage. You're incurring fixed costs as you go along.

So it's going to be really ugly-- I don't know how else to describe it-- when they report the quarter. So I think investors should really temper their expectations, especially-- and not just this quarter. We're talking about something that could linger for the rest of this calendar year.

That being said, I think Disney is as well positioned as any company within the media and entertainment space to ride this out. This is a time that their balance sheet flexibility should serve them right. We've seen them tap the capital market several times in the past month to shore up their liquidity and flexibility.

So net-net, I believe they should emerge from this crisis in much better shape than a lot of their peers.

SEANA SMITH: Hey, Tuna, well, we have Bob Chapek, the new CEO, just in terms of how he's been able to navigate this uncertain time-- there's been talk just in terms of companies, obviously like you were saying, needing to be nimble. They need to change their business models, at least to some extent. Are you expecting to see any lasting changes here in Disney's business model as a result of coronavirus?

TUNA AMOBI: You know, we've been asked that question time and again. I don't really think that there is any need for them to dramatically change their business model, nor do I think that there is necessarily any asset that could be a candidate for potential divestiture.

We know that Bob Chapek, he's an operating guy. He's cut his teeth around many of the traditional businesses that Disney is operating. He's got some steep learning curve in the streaming business. So I don't really expect any kind of major change in the core strategy so long as Bob Iger continues to be involved in the day-to-day role, on an executive chairman role, until 2021.

But you know, with the COVID situation kind of throwing a wrench in the whole strategy, frankly, I wouldn't be surprised if Bob Iger decides to stay a little longer, just to steer the ship and integrate Fox and make sure things are up and running. But ultimately, this depends on how long this COVID outbreak continues. And really, no one is certain about that at this point.

SEANA SMITH: All right. Tuna Amobi, CFRA Research Senior Analyst. Thanks so much for joining me.

TUNA AMOBI: Thank you so much.