Analyst lays out six reasons why Disney+ will eat Netflix’s lunch

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Bob Iger

Stephen Desaulniers | CNBC

Disney‘s new streaming service will lure customers way from Netflix and win the direct-to-consumer streaming wars, according to Needham.

The company’s new streaming service, Disney+, is set to launch in November. Needham said Disney’s streaming customers will “mostly come” from Netflix because “US consumers have shown a reluctance to add” additional streaming services.

Disney announced Tuesday that it would offer a bundle of Disney+, ESPN+ and ad-supported Hulu for $12.99 per month, which is the same cost as Netflix’s standard plan.The stand-alone Disney+ will cost $6.99 per month or $69.99 for a year.

This price difference is one of the main reasons Disney is set to attract Netflix’s customers, according to Needham. The five other reasons the financial firm listed are:

  • Disney will have most Pixar, Star Wars, Marvel and Disney princess films available at launch.
  • Disney’s current customer base lowers customer acquisition costs.
  • The bundle with ESPN+ and Hulu will lower churn.
  • Disney’s strong balance sheet and cash flow gives it “more staying power” than Netflix.
  • Disney already has several content studios.

Needham maintained its “Hold” rating on Disney, citing concern about how the $71 billion acquisition of Fox will effect earnings in the near term. Disney missed expectations on the top and bottom lines for its fiscal third quarter, which was announced Tuesday, and shares are down more than 4% in premarket trading.

The company generated $1.35 in earnings per share on $20.25 billion in revenue as it continues to integrate Fox’s entertainment assets. Analysts expected $1.75 in earnings per share and $21.47 billion in revenue, according to Refinitiv.



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