The global streaming video throne is replaced


Disney took the throne of global streaming video.

Disney’s second quarter earnings

Earning result

Quarterly revenue rose 26% year over year to $21.5 billion, and earnings per share were $1.09 per share; primarily driven by a 70% surge to $7.39 billion in revenue from Disney Parks, Experiences and Products, which Revenue at Disney’s parks unit rose six-fold to $2.19 billion a year. The media and entertainment segment grew 11 percent to $14.11 billion, while its media and streaming segment fell 32 percent to $1.38 billion. Worries about a potential recession, higher interest rates, and inflation ahead of launch could eventually have an impact on customers’ willingness to visit its parks or otherwise engage with its content.

But all these didn’t happen.

Disneyland and streaming determined share prices

The six-fold increase in revenue from the Disneyland division was mainly due to the fact that the comparison base period before last year was too low, and the park reopened after the epidemic slowed down. Therefore, the focus of this article will be on streaming video, because this is the main factor affecting the stock prices of listed companies in recent years. Disney+, which launched at the end of 2019, was one of the main reasons why the company’s stock price jumped 40% over the following two years.

Until the outbreak of the pandemic; the lockdown caused Disneyland and its resort center to be almost completely shut down, and the stock price plunged as high as 44%; coupled with the lack of cash flow, the company cancelled decades-long cash dividends. That leaves Disney stock barely performing in a 2020 period when most listed companies’ stock prices have risen, and will have to wait for Disney+ subscribers to report impressive subscriber growth rates in each quarter of 2021 before they rise.

However, the slowdown in user growth at the end of 2021 and the overall sharp decline in US stocks this year have caused the stock price to fall from the high point in March 2021 to mid-June this year, a total of 52%. It’s been hurt badly.

Disney streaming video

Subscribers surpassed Netflix

The day after the earnings report was released, share price rose by more than 4.68% (this is a big increase for Disney, and most of the US stocks fell on the day). There are two reasons for this:

  • Disney-owned streaming has 221.1 million total subscribers, outpassed Netflix for the first time. The difficulty is that what Netflix took 16 years to achieve, Disney took 2 1/2 years to achieve.
  • Secondly, when inflation is soaring, consumers generally start to frugal food; almost all online subscriptions e-commerce, financial technology, social networking, and advertising industry subscribers are facing stagnant user growth, even as Netflix. Especially under the circumstance that the user unsubscribed in one season resulted in the decrease of subscribers.

Not easy to grow significantly

The only downside is that it only added 100,000 subscribers at home, with almost all of that growth coming from overseas. As a result, management lowered its 2024 target for Disney+ global subscribers to between 215 million and 245 million.


As shown in Table 1, the brands, subscribers, and monthly fees of major streaming video platforms (source: financial reports of various companies, Statista, the author)

CompanyBrandSubscribers (million)Ad-free planAd-supported planPeriod
Disney 221.1   2022 Q2
 ESPN+22.8 9.99 
NetflixNetflix220.679.9912/8/20222022 Q2
Warner Bros. Discovery 92  2022 Q1
 HBO Max45.114.999.99 
ParamountParamount+629.994.992022 Q1
Comcast Peacock139.994.992022 Q1
AmazonPrime Video2008.99No2021
AppleApple TV+404.99No2021
IQIYI iQiyi1億470萬8.994.72022 Q1
Tencent VideoTencent Video129No4.22021 Q3

Content determines the future

Streaming is extremely expensive

The key to the success of streaming video platforms is the content they can provide. The protagonists are TV series and movies, but popular content costs a lot of money. Table 2 shows the annual content budget of the major streaming video platforms. Companies do not necessarily publish figures on a regular basis. The data in this table are mainly from the content of the company’s earnings conference calls, financial media, and estimates from Wall Street investment banks, and are compiled by the author. Money unit is in US$ biilion.

YearNetflixAmazonDisneyWarner Bros. DiscoveryApple
202217Not provide15184.2
20178.913Not provideNot provideNot avaialbe
20166.88Not provideNot provideNot provideNot avaialbe
20154.61Not provideNot provideNot provideNot avaialbe

Among them, it is worth noting that Disney’s budget for streaming video is not surprising before 2020. This is because only Hulu and ESPN+ were only at that time, and the main streaming movie and TV product Disney+ was launched at the end of 2019.

Unique content gives it pricing power

Netflix has had a stable net profit since 2004, and Disney’s streaming video is actually still burning a lot of money and losing a lot of money, with a total loss of $1.1 billion in 2022; but in the long run, it should be able to break even. Because it has a huge source of TV series, cartoons and movies, etc. that no other industry peer can match, especially its unique, rich and diverse animations such as Marvel, Fox, Pixar, and Lucas.

And Disney can create more content for TV, animations and movie distribution, collect royalties, and even act as a content provider on a competitor’s platform. Disney’s animations and family-friendly entertainment films are irreplaceable, and it is difficult for most competitors not to provide Disney’s animations, resulting in Disney’s unilateral uniqueness that other content providers do not have when negotiating royalties — this is pricing advantage. That’s why it dare to raise the monthly subscription fee for streaming video across the board a few months ago. It raised the price without worrying that users would abandon their service. Just like its theme park, it has a unique moat.

Disney’s achievements

I discuss it in detail in sections 2-3 of my book “The Rules of Super Growth Stocks Investing”

  • Disney accounted for 16 of the 30 highest-grossing films of all time.
  • The highest-grossing animation in history, the top 3 are all produced by Disney.
  • Disney accounts for half of the top 10 most profitable IPs in the world.

Other department

Parks and Experiences

One that has been hit particularly hard by the pandemic is its parks and experiences business. In this handover, the number of tourists in global parks has increased by 69% year-on-year, the number of visitors in the United States has increased by 93%, and the international market has increased by 17%; per capita consumption has increased by 18%, of which international consumption has increased by 8%, while domestic consumption 10% increase. The occupancy rate of domestic resort centers is as high as 90%, compared with 50% in the same period last year.

Movie distribution

Another important part that investors can focus on is the distribution of movies. With the movie box office coming back to life, it’s almost certain that the company’s revenue will increase year after year. China will become the world’s largest movie market in 2021, and Marvel series is also very popular in China. However, in the past few seasons, Disney’s film and television distribution in the mainland China has continued to be blocked, and many popular new movies have failed to enter China. Not being able to enter the mainland China is a big loss for Disney’s movie box office.

streaming video

Closing words

Disney is financially healthy; cash flow is positive and improving, and net debt is decreasing. Its brand is strong enough to be a leader in the media and entertainment industry, with an eternal myriad of priceless intellectual property rights, when it makes money by promoting higher ideals and family values. This has been proven for decades. The results of this quarter’s financial report just show that when inflation is high and the economy is clearly down, the revenue of peers and most companies has stagnated or decreased, but it has delivered extraordinary results, which is the best example.

I am the author of the original text, the abridged version of this article was originally published in Smart monthly magazine.

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