The streaming industry has grown to include a wide pool of options, but the rough waters that the market finds itself in lately are making it somewhat difficult for investors to navigate.
Walt Disney (DIS 0.84%) has dipped its toes in streaming over the years in various forms, including ESPN+, Hulu, and Hotstar (now Star+ and offered in various foreign markets), but it went all-in on streaming in November 2019 with the launch of Disney+. The new service quickly became a real competitor for streaming veterans like Netflix (NFLX 0.39%).
Disney's streaming efforts have become a focal point for potential future growth for the company that has already had so much success in everything from theme parks to film studios to TV networks to travel to merchandising. And a recent success story in its streaming efforts offers a fresh example of what makes this stock a safe bet for streaming investors.
For Disney, content is the key to its success
Disney's streaming efforts have attracted millions of subscribers by generating plenty of content involving two of its biggest brands: Marvel and Star Wars. Its clever streaming strategy of producing shows that expand each of these franchises and making the content exclusive to Disney+ helped it coax millions to sign up and stay with the service. It is now trying to leverage that strategy for its other streaming services as well.
The film Prey was released on July 21, exclusive to Hulu in the U.S. and Disney+ abroad. The movie is the newest installment in the Predator franchise, made famous by the 1987 film starring Arnold Schwarzenegger. There have been multiple Predator-related films since that first one (all theatrical releases). But Prey was exclusive to streaming and has now become the biggest premiere of any film or TV series in Hulu's history, as well as the most watched premiere on Disney+/Star+ in all other territories.
Its success is significant as it illustrates Disney's expert skill at boosting a franchise, no matter what came before it. The Predator franchise is owned by 20th Century Fox studios, which Disney bought in 2019. 20th Century Fox filmmakers have repeatedly tried to reboot the Predator franchise over the years, but with limited success. The last attempt was in 2018 with The Predator, which was the first new installment in the series since 2010. It generated disappointing box office receipts and was the lowest-grossing Predator film of the main series.Using the industry rule of thumb that a film should at least double the film's production budget to be considered profitable, The Predator couldn't quite make it, bringing in $160.5 million worldwide on a budget of $88 million.
The critical and commercial success of Prey shows that Disney still has the ability to take what many had thought was worn-out intellectual property and give it what it needs to once again attract an audience and make money for the company.
Ahead of the competition
Disney's ability to breathe new life into a past franchise gives it a significant leg up on competitors like Netflix and Warner Bros. Discovery (WBD 6.01%).
In 2013, Warner Bros. film studio released its Superman film Man of Steel and kicked off the DC Extended Universe (DCEU), meant to rival Disney's Marvel Cinematic Universe. The DC film series has since grown to include 10 connecting movies, with more on the way. However, Warner Bros. Discovery has experienced significant losses due to its mismanagement of the franchise. On Aug. 3, the company shelved the nearly completed DCEU film Batgirl which resulted in a loss of $90 million, after deciding it could actually save millions in distribution and marketing costs for the film by not release on streaming or in theaters. The loss is significant as Warner Bros. Discovery is currently saddled with an estimated $55 billion of debt -- a result of the WarnerMedia and Discovery merger.
Warner Bros. Discovery's inability to keep a franchise filled with characters as popular as DC going is a sign of how tough the business is to succeed in. Disney's continued success in this regard with its franchise efforts and reboots is further proof that it is a true content leader.
On the horizon
In the streaming wars, content is the biggest driving force for subscription growth. Disney has barely scratched the surface with the attractive library it acquired from Fox, with franchises such as X-Men, Avatar, Percy Jackson, and more waiting to receive the Disney treatment. Considering all its other in-house brands as well, the entertainment company clearly has what it takes to go the distance.
The biggest developments in Disney's future are currently the launch of its ad-supported tier on Disney+ in December and the price hikes being implemented on all of its streaming services. Investors will be glad to know that both of these shifts are expected to be positive for the company; an ad-supported tier has the potential to substantially increase subscriptions and profits, while price hikes can raise the average revenue per user for its platforms.
All things considered, Disney is in an excellent position to dominate the streaming industry, making its stock the safest bet for investors.