Ahead of its first earnings of 2020 in February, Disney is set to start off 2020 with a mountain to climb, but the future looks bright.
Q1 2020 will see the company report for the first time on its new streaming platform Disney+. In 2019, Parks, Experiences and Products brought in over $26bn revenue for the company. This was up 6% on 2018 and it continued being the company’s largest revenue stream.
In 2020, however, with the introduction of Disney+, its media networks division may well overtake its parks division.
The launch of Disney+ was much anticipated throughout 2019, and finally came online on November 12 for $6.99 per month. The pricing was set to match Netflix’s standard plan, and allow consumers to believe Disney represents not just a service to have alongside the biggest streaming service in Netflix, but provide a viable alternative.
The number of users was initially expected to be no more than 20 million. However, analysts believe the service may now have already attracted over 24 million subscribers.
Initially the company has targeted between 60 million to 90 million subscribers by end of 2024. At the present rate of progress, they appear likely to achieve subscriber numbers in that range.
Disney pulled content from other platforms, posting it the company’s own streaming service. Growing debt and operating costs at Netflix have concerned investors for a while. Gross debt reached over $14.7bn at the end of 2019, so investors will start to look elsewhere. Therefore, if the Q1 2020 earnings of Disney+ surpass expectations, it may cement a big shift in the streaming world.
Troubles in China have harmed short-term growth
The share price is down 10% since the last earnings report in November 2019 thanks to troubles in and around China, hampering revenue growth.
Protests in Hong Kong, which started in early-mid 2019, have affected footfall on the company’s Hong Kong park. Similarly, ongoing trade tensions between the US and China have lowered consumer confidence in the region.
In Hong Kong, operating profit was down by $55m July to September in 2019 as a result of the protesting. Disney has warned that if further disruption continues, 2020 could see up to $275m in lost revenue.
Moreover, the Coronavirus crisis is likely to persist for a while yet, meaning the damage to revenue could worsen further. Consequently, for drops in revenue to be contained the company is now relying on the streaming service meeting or exceeding expectations.
To keep investor confidence up, it is essential Disney+ attracts sufficient interest to ensure geopolitical problems in attractive Far-Eastern markets will not cause meaningful revenue loss on a long-term basis.