Season two of “The Mandalorian” premieres Friday, and Disney (DIS) is banking on its success to drive more subscribers to its year-old streaming service. Disney stock rose.
Disney+ has amassed more than 60.5 million subscribers in the less than one year that it has been available, thanks in large part to the success of the first season of “The Mandalorian.”
By comparison, Netflix (NFLX) ended the third quarter with 195.15 million subscribers, though growth has slowed.
It’s unclear how many viewers churned off Disney+ after the first season of “Mandalorian,” but Wall Street analysts agree that the Star Wars series was a key driver of paid subscriptions for Disney+.
Bank of America analyst Jessica Reif Ehrlich says “Mandalorian” is “hugely popular and a critical show” for Disney.
Last year, Disney teamed up with Verizon (VZ) to offer Disney+ for free at its launch, waiving the cost of $6.99 a month or $69.99 a year. That deal ends on Nov. 12, a couple of weeks after the start of the second season of “The Mandalorian.”
The timing seems to suggest Disney is hoping subscribers will stick around and pay for a subscription to watch the entire second season. Prospects for renewals may be helped by higher subscription costs at Netflix. On Thursday, it raised its standard price in the U.S. by $1 to $14 a month. It hiked its premium tier price by $2 to $18 a month. Netflix is keeping its basic plan at $9 a month.
“We think having ‘The Mandalorian’ season two coming out before the first batch of the Verizon promos expire will be a positive,”said Rosenblatt Securities analyst Bernie McTernan.
CFRA Research analyst Tuna Amobi says he expects the second season to build on the critical acclaim of the first season.
“It’s really hard to know how much of an impact any given show can have on subscriber growth, but … I think it’s fair to say we’re going to see major acceleration in subscribers,” he told IBD.
Shares rose 2.6% to 121.53 on the stock market today, reclaiming the 200-day line. Disney stock is in a consolidation but well below a 153.51 buy point and has been hitting resistance at its 50-day line, according to MarketSmith chart analysis.
Recently, Disney announced a reorganization to reflect its focus on its streaming media business. The move gave Disney stock an immediate lift and comes as the theme parks segment continues to deal with pandemic restrictions. Several of its theme parks reopened, but with limited capacity. And Anaheim, Calif.-based Disneyland remains closed for a least several more weeks.
Frost & Sullivan analyst Dan Rayburn says Disney had already been investing heavily on its streaming services. “Now they’re reinforcing how important their direct-to-consumer streaming services are,” he said.
They have some way to go to catch up with rival Netflix. Worldwide, including Hulu and ESPN+, Disney has 104.5 million subscribers vs. Netflix’s 195.15 million. Analysts say Disney is well-positioned to make up some ground. Disney plans to launch Hulu globally as Star. They’re expected to reveal details of that streaming service at its virtual Investor Day on Dec. 10.
“We think that’s going to narrow substantially over the coming 12 to 24 months,” said McTernan. “Don’t forget that Disney went out and bought Fox for its content and knowing that you need to take content globally for streaming. The Fox content is going to be one of the key aspects of the Star international programming lineup.”
New Content Is Key For Disney Stock
Ultimately, new content will be the long-term driver of subscriber growth and retention for Disney’s streaming services in the U.S. and abroad. Disney has more than 50 new shows and movies slated for Disney+.
But like other studios it had to shut down production when the pandemic hit. In the interim, Disney turned to its large library of classics.
And as theaters remain closed in large markets like Los Angeles and New York, Disney decided to offer its blockbuster “Mulan” on Disney+ for $29.99 on Sept.4, after it had been delayed since mid-March.
Analysts say Disney wanted to recoup some of its investment in the big-budget production rather than let it sit on the shelf indefinitely. It’s not yet known how many people bought the movie.
But Rayburn says the strategy was worth a try. He expects Disney to share details on revenue from “Mulan” at its next earnings announcement Nov. 12. Analysts expect a 60-cents-a-share loss for fiscal Q4 as revenue falls 24.7% to $14.38 billion.
“I think it did better than what many on Wall Street are going to expect,” he said.
More recently, Disney said the Pixar movie “Soul” would also be available on Disney+.
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