More valuable than the Mouse House?
Disney drops below Netflix in value, but a Beatles doc and fresh content could boost it.
Not too long ago, anyone who said Netflix would soon be worth more than Walt Disney Co. would have sounded as arrogant as John Lennon calling the Beatles “more popular than Jesus” in 1966.
But the decline in Disney’s stock, following a disappointing earnings report that included tepid Disney+ subscriber growth, resulted in a notable milestone: Netflix is now more valuable than Disney to Wall Street, in terms of market capitalization.
Based on Wednesday’s closing share prices, Netflix (which closed at $691.69) is now valued at $306 billion, compared with $285 billion for Disney.
Disney shares, which closed at $157.33 on Wednesday, have slipped nearly 10% since the company said its key streaming service had gained just 2 million subscribers in its most recent quarter, its lowest number of additions to date.
If you’re reading this, you can recite by heart the brands that have made the Walt Disney Co. the envy of the entertainment industry for the last few years — Disney, Marvel, Star Wars, Pixar... Disney, Marvel, Star Wars, Pixar...
Those cultural juggernauts and a low monthly price of $7 (now $8) quickly
propelled Disney+ into the upper echelon of streaming services after its November 2019 launch.
Now, though, some analysts have started to worry that Disney+’s dedication to these brands and its family audience might also be a hurdle in the Burbank giant’s quest for digital domination.
Bob Chapek, Disney’s chief executive, said the company was looking at the long-term growth of Disney+, not the quarter-toquarter upticks. He has maintained that the service is on track to hit its target of 230 million to 260 million subscribers in 2024.
Chapek assured investors and analysts that
subscriber numbers would pick up once a “surge” of new programming started hitting the service, with the bulk of the big titles coming next July through September. New content is by far the best way to bring in new subscribers, he said.
But the type of content Disney offers is starting to get as much scrutiny as the amount of new programming on the service. After Disney’s earnings report, Cowen & Co.’s Doug Creutz wrote about being “somewhat skeptical that more Star Wars/Marvel/animated/family content will be sufficient” for Disney+ to catch up with Netflix, which has a library about as broad as it could be.
Analyst Michael Nathanson posed his question to Disney executives this way: “Are there any cohorts, any demographics, that you’re underpenetrated and perhaps the widening out of content is an issue vs. just more new content?”
Translation: No one’s seriously questioning whether Marvel and Star Wars are hugely popular. However, if you’re someone who really cares about Marvel, Star Wars, Pixar or the “High School Musical” franchise, you probably already have Disney+, right?
Responding to Nathanson, Chapek acknowledged that “being a fourquadrant service, we need to be broad in our approach.” He also cited preschool programming as a major opportunity. Former Disney executives Kevin Mayer and Tom Staggs clearly agree. Their Blackstone-backed firm is paying close to $3 billion for the company that makes “Cocomelon.”
Disney knows it needs more material, but it’s largely sticking with its branded IP strategy. That much was clear from the slew of trailers and footage it posted online Friday in celebration of the service’s second anniversary, dubbed “Disney+ Day.”
The company touted upcoming content including its re-imagining of “Cheaper by the Dozen” and Marvel’s “Hawkeye” series. Critics noted that the announcements, accompanied by a promotional discount, were light on news. Much of the highprofile material unveiled was from shows that had already been announced.
Disney folks have long been frustrated by the implication that their marquee streamer is mostly for kids. They argue that the appeal of its content is already extremely broad. You don’t get to $2.8 billion in box office for “Avengers: Endgame” by going narrow. More than half of Disney+ subs are adults without children, Chapek has previously said.
What would a non-Disney, Marvel, Star Wars, Pixar programming lineup look like, though? The family focus of Disney+ is partly a result of how the company’s streaming strategy is set up, at least in the U.S., with more grown-up material earmarked for Hulu.
Well, we’ve already had a couple of examples of how it can work.
“The Simpsons” isn’t an obvious fit for Disney+, but it’s there anyway for your binge-watching pleasure. Same with the National Geographic shows.
One of the biggest events in Disney+’s short history was “Hamilton,” originally intended for the big screen but converted to a straightto-streaming release pegged to the Fourth of July.
This is why it makes so much sense that Disney is putting Peter Jackson’s six-hour documentary, “The Beatles: Get Back,” on Disney+ in three installments starting Nov. 25.
Like “Hamilton,” the Beatles are sure to appeal to a broad swath of viewers, including those who don’t care about the Marvel heroes’ latest excursions through the multiverse. If you’re not committed to untangling the plot twists of Wanda, Loki, Captain America and She-Hulk, maybe John, Paul, George and Ringo are more your speed.
If “The Beatles: Get Back” becomes a massive holiday event over the week of Thanksgiving, it could provide a template for Disney+ to expand its reach.