We are in a bear market, and Walt Disney (DIS 0.16%) hasn't escaped its crosshairs. Down 35% year-to-date, the House of Mouse has left investors in a world of pain despite some encouraging developments in its direct-to-consumer video streaming businesses. But there is light at the end of the tunnel for patient investors.

Disney becomes a streaming company

It's hard to find a better example of perfect timing than Disney's 2019 release of its streaming platform, Disney+. The service arrived just in time for the COVID-19 pandemic, in which millions of people turned to at-home entertainment to cope with lockdowns and movement restrictions during the crisis. The direct-to-consumer business is supercharging Disney's revenue and could soon boost the company's bottom line. 

In the third quarter, combined direct-to-consumer video (Disney+, ESPN+, and Hulu) subscriptions grew 27% to 221.1 million. For context, major rival Netflix boasts just 220.7 million subscribers despite having a 15-year head start in video streaming. 

What is behind Disney's breakaway success? Its economic moat. Unlike Netflix, which has usually had to build content from the ground up, Disney+ has well-established franchises such as Star Wars and Marvel, which it uses to pump out hit shows with a ready-made audience of fans. 

The next step is streaming profitability

Though it has slightly fewer subscribers than Disney, Netflix creates significantly more value for investors. In its most recent quarter, it generated about $7.97 billion in revenue and $1.58 billion in operating income. For comparison, Disney's direct-to-consumer business generated revenue of $5.1 billion and an operating loss of $1.1 billion in its most recent filing. 

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The good news is that Disney has a lot of options to close the gap. As a new entrant to the market, it needs to rapidly increase its content library -- leading to near-term spending that could ease over the long term. Further, with a monthly price tag of $7.99 (compared to $9.99 for Netflix's basic plan), Disney + has room to increase prices. Starting Dec. 8, the platform plans to increase its subscription to $10.99 a month, while introducing a new, ad-supported version at the current price of $7.99. 

Focus on the valuation 

While Disney has not historically been seen as a value stock (that is, a company trading at a low price relative to its earnings and growth potential), the recent declines have brought it closer to that category. It has a forward price-to-earnings (P/E) multiple of 17.4, slightly lower than the S&P 500's average of 17.9, despite its solid economic moat and convincing growth drivers. The shares also trade at a discount compared to Netflix, which boasts a forward P/E multiple of 20. 

While many investors are understandably nervous about buying anything in a bear market, Disney looks like a great way to bet on a future rebound.