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1 Reason Disney+ Likely Added Millions of Subscribers -- and It's Not "The Mandalorian"

By Parkev Tatevosian, CFA – Nov 5, 2020 at 7:24PM

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This may be overlooked by investors who are focusing on other drivers of subscriber growth.

Walt Disney (DIS -0.15%) is set to announce its fourth-quarter and fiscal 2020 results on Nov. 12. While the rest of its businesses are continuing to struggle amid a global pandemic, its streaming services are thriving. Overall, they have attracted over 100 million paying customers.

Disney+ has been the star, gaining subscribers at a blistering pace since it launched in Nov. 2019. It has already reached over 60 million paying customers as of the most recent update. Since that update, the company has introduced the service to several additional countries, started releasing the second season of the popular show The Mandalorian, and made Mulan available for purchase for members only on Disney+. All of those likely attracted many more viewers to its service. However, there is one additional reason that the company will likely report millions more subscribers, and it's not any of the ones mentioned above. 

The Disney+ app displayed on a smart TV.

Disney+ is rapidly increasing subscribers. Image source: Disney.

Customer interest is surging in India

Disney first introduced Disney+ to India, with a population of 1.38 billion, in April. The company updated investors on subscriber details during a conference call and said that roughly 15% of Disney+ customers were from India.

What's more, interest in Disney+ is surging to higher levels than when it was originally launched in the country. The culprit is the return to action of the Indian Premier League, which is incredibly popular and can be viewed through the Disney+ Hot Star service. In the first four weeks since launch, it has been watched by 361 million people. India is one of the countries worst hit by the coronavirus pandemic; many kids are studying from home and millions of adults are working from home to help slow the spread. That could explain the surging demand for viewing the IPL. According to the Broadcast Audience Research Council India (BARC), IPL 2020 has registered 30% growth per match in terms of viewing minutes as compared to the 12th edition of the league.

As a result, one report suggests that Disney+ Hot Star is experiencing 99% week-over-week increases in its user base. If that report is true -- and, according to company estimates, it already had a user base of 9 million -- Disney could report millions of additional subscribers this quarter from India alone. 

What this could mean for investors

Disney's streaming services have been a saving grace for a company that's going through troubles in nearly all of its other businesses. Disney+ generates an average revenue per user of $4.62, which, when multiplied by its 60.5 million members, will bring in an estimated $3.35 billion for the company in annual recurring revenue.

A chart of a price to earnings ratio comparison between Netflix and Disney

Data source: YCharts.

Moreover, streaming rival Netflix (NFLX -1.12%) consistently sells at a price-to-earnings (P/E) ratio that is above that of Disney, in part because its revenue is mostly recurring. As Disney builds out its streaming services and derives a larger portion of its overall revenue from them, it may start to be valued at a P/E ratio that narrows the gap to Netflix. The prospect of an increasing P/E multiple may help long-term shareholders of this consumer discretionary stock ride out the difficulties caused by the pandemic. 

Parkev Tatevosian owns shares of Walt Disney. The Motley Fool owns shares of and recommends Netflix and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney. The Motley Fool has a disclosure policy.

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