Walt Disney (NYSE:DIS) plans to launch its over-the-top streaming service in November. The company plans to charge $6.99 per month -- about half the price Netflix (NASDAQ:NFLX) charges. The service will launch with Star Wars and Marvel content along with a ton of classic Disney material. It will also have an enormous archive of Disney-owned content. But even when it hits 70 million subscribers, it will still generate less than 10% of the company's overall revenue.
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This video was recorded on April 16, 2019.
Dylan Lewis: We're talking Disney in this second segment here, Dan. This is a check-in on a conversation that we had back in January. We finally have some details on the Disney+ offering that a lot of people have been waiting for.
Dan Kline: I'm so excited about this!
Lewis: You're personally excited.
Kline: We've talked about on this show, me and you and various other hosts, about how many streaming services I have. The answer is roughly all of them except, like, I don't have the MLB package and things like that. But I've got like 13 or 14 different streaming services, partly for my job, partly because I'm not good with money in some situations.
Lewis: You enjoy it, right?
Kline: Yeah, and I do watch a lot of stuff. I was steeled against Disney+. There was a part of me going, "All right, I'm a big Star Wars fan, but it's only two Star Wars shows. I like all the Marvel movies... wait a minute, it's going to be six Marvel shows?" The offering of content if you're a family is super Disney, everything Disney ever eventually, once the rights clear up. New shows from Marvel, new Pixar content. Really, something for everybody. All the Fox content. The Simpsons' new home will be Disney+. And they're charging $6.99 a month for it, which is roughly half the price of Netflix.
Lewis: Yeah, I think that's a masterstroke move. I have to give you and I a little credit here. When we talked about it back in early 2019, we did say, "I'm expecting this to go up at about $7 or $8 a month." Looks like we got that one right.
I think if you're looking to have multiple streaming subscriptions to pay $11 or $12 a month, maybe $13 a month for Netflix, and then be able to tack this on and only be paying about $20, that feels pretty reasonable.
Kline: They're going to take share from Hulu, which is their product, which is interesting. They're going to counteract that by offering you Hulu Live, Disney+, ESPN+, at a bundle price. They haven't said what that bundle price is. But they did acknowledge that they intend to do that.
Lewis: When is this actually going to launch, Dan? When are people going to be able to start using it?
Kline: Oh, you have to ask that? November?
Lewis: I think sometime in the early fall, maybe November 12th, something like that.
Kline: That sounds right. It's going to be a blockbuster launch. They're not rolling out with all this content at once. But honestly, they're going to launch with The Mandalorian, which is the Jon Favreau Star Wars Show. That alone might have got me to buy the first couple of months. And if you're a movie fan, they will eventually have all the Avengers movies, all the Pixar movies. It's a huge wealth of content. We said this on the other show. They're the only people who could do this. Nobody else could launch an immediate Netflix competitor.
Lewis: Yeah, and the pricing is smart. I think what people need to keep in mind with this is, the stock went up 10% after they announced these details on their investor day. This is all-time highs for Disney, which is great, because as a Disney shareholder, I've looked at it for a while and been like, "There's something wonderful here, but we've been just swimming along and there hasn't really been great gains." Even with this great news, even with this stock pop, this is not going to be something that immediately changes the books for Disney.
Kline: No. It's a huge investment. They forecast 60 to 90 million subscribers by 2025. That's a huge number. You have to assume the price will go up because everyone else will go up. Probably every time Netflix raises $1, Disney will go up by $0.75.
Lewis: We're getting close to an annual cadence on that.
Kline: Yeah. At some point, I think there's going to be a value loss. Maybe it's $15, maybe $19. I don't know what the number is. But we've talked about, you can shut Netflix off. Right now, you lose some of your saved stuff. But you could be like, "I'm going to just watch Disney for the next three months." And some people do binge watch TV that way. I tend to be more, I watch traditional, episodically. I don't want to watch four episodes of the same show in a night most of the time. That method maybe doesn't work for me. But for your generation, that's used to bingeing, I think Netflix is going to push people to say, I'm going to shut my account off for three months.
Lewis: I know there are some people that do the streaming rotation. They have one for three or four months of the year. Then they switch over and have another one for another couple of months. They do this like A, B, C, D, rinse, repeat so that they can watch all the shows that are new on the platform. I'm not one of those people. But I also only have a Netflix subscription. Maybe that's part of it.
Kline: It's something I feel like I should do. And anytime I've ever thought about it, I'm in a three-person household, I have a wife and a child. So I'll say like, "I'm not watching Netflix this month," but my wife will be eight episodes into something. So it doesn't always work. But with a little bit of planning, I think the pricing is going to get high.
Lewis: Yeah, it's a little tougher to do that when you have that many stakeholders. As someone who is just me making those subscription decisions, a little bit simpler.