Disney Is Bearing “The Burden Of The Brand,” According To Analysts

As Disney (DIS) prepares to launch its $7.99 Disney+ ad tier in December, exactly one month after the highly-anticipated debut of Netflix (NFLX), the company is up against an extremely competitive landscape.

Analysts continue to have a positive outlook on the profitability possibilities of ad-supported services, despite the fact that advertising spending has slowed down. In spite of this, investors will be paying close attention to Disney’s execution as the competition for advertising money heats up.

Eunice Shin, a consultant at consulting firm Prophet, told Yahoo Finance Live that “Disney has a burden of the brand where there’s a higher expectation in the quality of the ads experience” (video above). She noted that advertisers will have “a very broad range of where they may go and post their commercials,” which will result in a marketplace that is highly competitive.
The stock of Disney began to rebound on Thursday in the midst of a broader market surge, and by the time the market closed, it had increased by more than 4%. After-hours trading on Tuesday saw a precipitous drop in the price of the business’s shares after the company disclosed earnings for the fourth quarter that fell short of forecasts across the board, with the exception of subscriber net additions. On Wednesday, these losses escalated as investors focused their attention on Disney’s declining park income and growing losses within the company’s streaming sector. Both of these trends have been a source of concern for investors in recent days.

Following a loss of $1.1 billion in the previous quarter, Disney+, Hulu, and ESPN+ combined to lose $1.5 billion in the fourth quarter. The average revenue per user for Disney+ also fell short of expectations, coming in at $3.91 as opposed to the $4.29 that was projected as a result of a negative impact from foreign exchange and a greater subscriber mix.

The administration has stated that it anticipates a decrease in streaming losses of around $200 million in the first quarter of 2023 and that Disney+ is still on pace to become profitable in the fiscal year 2024.

Advertising is one of the strategies that the organization intends to implement in order to achieve their goal.
Shin mentioned that the most difficult task that Disney will have is coming up with an ad experience that won’t cause any friction on the platform and will help it stand out in comparison to other companies.

“How do you prevail in a captivating space where there is a great deal of rivalry and a great deal of anticipation?” Shin was really emphatic. “The buyers of media are anticipating a profit. They anticipate positive outcomes. That is something that all of these other streaming services, including Disney+, are going to have to truly deliver on.”

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During an interview with Yahoo Finance Live, Kutgun Maral, an analyst at RBC Capital Markets, expressed concern that the growth of the ad tier will likely take some time.

‘It’s probably more of a back half of 2023 kind of event, and more meaningfully in 2024, kind of event in terms of the upside we see from advertising,’ he surmised, adding, ‘Part of the upside on this ad-supported tier will hinge on, hopefully, an improved macro environment.’ ‘It’s probably more of a back half of 2023 kind of event in terms of the upside we see from advertising, and more meaningfully in 2024
The fourth quarter saw net subscriber additions for Disney+ grow to 12 million, which was far higher than the approximately 9 million that was anticipated. The company announced an increase in subscribers during the third quarter of 14.4 million, which they attributed to new market openings and a rich slate of content. This led to the company exceeding their expectations.

The business issued a warning that it anticipates core Disney+ subscriber growth and subscriber counts for the Indian service Hotstar to be lower in the first quarter of 2019. For the full year of 2023, it is anticipated that content spending will be in the low $30 billion area.