Please ensure Javascript is enabled for purposes of website accessibility

3 Ways Disney+ Can Hurt Disney in 2020

By Rick Munarriz – Feb 1, 2020 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Disney's new streaming service is a hit, but it could have negative long-term ramifications.

Everybody loves Disney's (DIS -1.96%) new streaming service, and for now that's been more than enough for the media giant to beat the market in 2019. The buzz was strong ahead of the mid-November launch of Disney+, and it delivered when The Mandalorian became the platform's first hit series. 

Disney will wow investors when it reports impressive subscriber and engagement numbers next week. The market will overlook the potential weaknesses elsewhere, and it could possibly even dismiss the warnings of how coronavirus will eat into its theme parks and theatrical releases in the current quarter. But the honeymoon may not last as 2020 plays out. Let's go over three ways the initial success of Disney+ can sting the media giant's other businesses. 

Mickey and Minnie on a float during an afternoon parade.

Image source: Disney.

1. Audiences will bail on media networks

Disney's media networks division was once the shining star at Disney. ESPN, ABC, and Disney Channel helped set the tone for the rest of the company. The segment has been in a rut lately, and understandably so. Younger audiences aren't watching traditional TV anymore. Have you seen ABC's ratings lately? Streaming services have binge-hungry audiences unwilling to sit through long ad breaks.

The cord-cutting revolution is real, and that's hurting Disney's cable properties. Cable and satellite television providers pay Disney hefty fees for carriage rights for active subscribers, and that's also trending the wrong way. All of this was happening before Disney+ arrived on the scene, but the service's success is making it easier for fans of its biggest properties to cut the cord. You can now have access to Disney's deep vault of content for a fraction of your monthly cable bill. You can expect to see acceleration in the cord-cutting cadence, and Disney+ will be a big reason for the migration.

2. As the multiplex gently weeps

Movie theater audiences peaked in 2002, and exhibitors have been blaming the growing popularity of streaming services as a culprit for shrinking traffic in recent years. Disney is holding up better than lesser studios. It scored the country's six biggest theatrical releases in an otherwise brutal 2019 for the industry. It doesn't get better from here.

Avengers: Endgame was last year's biggest box office winner. It hit theaters in late April, and less than seven months later it was available on Disney+. Would you pay up to see a movie in a noisy theater when you know you can see it from the comfort of home a few months later, through a service you're already paying for? It wouldn't be a surprise if Disney releases this year feel the pinch as fans realize that they can wait. The tentpole movies will still draw opening weekend audiences, but casual fans and repeat viewings from hardcore devotees will shrink with the success of Disney+.

3. Even the happiest place on Earth might frown

Disney's theme parks won't feel the same pinch as the entertainment behemoth's media networks and studio entertainment divisions, but it may still feel the pain. Disney+ may be a great tool to promote both the history and future of its gated attractions, but it may also scratch the itch for folks planning their next vacations. 

Disney+ could turn Disney fans of the great outdoors into homebodies -- and that's if the next recession doesn't do it first. The argument for Disney+ to take a bite out of Disney's theme parks isn't as obvious as the tug it will have on its broadcasting and theatrical arms, but it's certainly possible. The one thing Disney bulls are feverishly applauding right now could be the very thing that does them in down the line.  

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short April 2020 $135 calls on Walt Disney. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$97.45 (-1.96%) $-1.95

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.