What’s happening: Shares of Walt Disney spiked around 7% in pre-market trading after the company reported strong subscriber figures for its streaming service.
What happened: Disney announced that its new video service, Disney+ has crossed 50 million subscribers globally. This marks a huge jump from the 26.5 million subscribers reported when the company announced its first-quarter results on February 4.
Although the stock has been under pressure since the beginning of this year, it has exhibited relative resilience. Disney’s stock has been holding up, even as the company closed its theme parks around the world and coronavirus ravaged other stocks on Wall Street. In this grave scenario, Disney has one business that is supporting its stock.
Why it matters: Walt Disney is facing a massive financial crisis, as its core business is built on social interaction. Amid this crisis, Disney+ is expected to offer the much-required immediate relief.
Disney launched its streaming service in the US in November 2019. Over the last two weeks, Disney+ was launched in the UK, Ireland, Germany, France, Italy, Switzerland, Spain and Austria. Disney also launched its service via its content streaming subsidiary, Hotstar, in India last week. With India under a lockdown, 8 million of the total 50 million subscribers reported yesterday were added from this country alone.
With people stuck at home following the coronavirus outbreak, the demand for online entertainment has surged. Verizon said that its web traffic had increased 20% in just one week, while Nielsen reported a 22% surge in streaming viewership during the week of March 16.
Major rivals of Disney+ are also witnessing a strong increase in subscribers. In its recent quarterly report, Netflix reported 167 million subscribers, while Amazon’s prime memberships reached 150 million in January.
Although Disney+ is an advantage, coronavirus is hurting the company’s overall growth, with theme parks closed and production of films halted. Its movie division has postponed the release of some major films. Disney is expected to forego $280 million in revenue just from the park closures in Shanghai and Hong Kong
While the company is still airing TV programs, all major sports events have been postponed and there is nothing to air on its ESPN network.
To increase traction for Disney+, the company is making movies available much earlier than planned, including Frozen II and Onward, and is contemplating a hike in subscription fees.
In order to deal with the coronavirus pandemic, the company decided to furlough its employees as of April 19, for jobs that are not required for the time being.
What to watch: Although the company has reached a strong milestone in a short period of time, subscribers are expected to continue growing as lockdowns are being extended in most parts of the world. With other segments closed or operating partially, Disney is hoping to minimise overall losses through its Disney+ service