Disney is betting huge on the new streaming service and estimates show how rewarding this venture may be.
In Morgan Stanley, analyst Benjamin Swinburne’s research note, he has estimated that after the service hits 30 million subscribers, it may generate 5 billion in revenue and 1.5 billion in EBITDA and results in $20 to $25 billion dollar worth for Disney’s asset.
“Disney’s brands and content depth and breadth give it a unique opportunity among existing content producers to build a large global customer base in a direct to consumer streaming model,” Swinburne wrote.
Disney had surprised many people by ending the deal with Netflix in 2019, which has been profitable for the company. Swinburne does not think that it will have a problem pulling 10% to 12% of Netflix’s subscriber growth by 2028. This would mean that Disney will hit 30 million subscribers over the next 10 years.
The Disney service will come out strong. Once the Netflix deal ends, it will have lots of properties to pull from. Disney Channel, core Disney, Pixar, Marvel, and Star Wars movies and TV shows will give it a popular catalog from the start and 2019 is shaping up to be a big year forthose, so it may launch with some momentum.
It is a heavy investment to get things running for a new service, and this includes money lost from licensing deals with streaming services. Disney brings over $500 million from that, and the TV licensing division hits $2 billion per year.
This means that when the expenses are tallied and $9 per month fee is considered, it will have to hit 32 million subscribers to break even. Netflix surpassed 100 million subscribers, while HBO Now has 3.5 million subscribers and CBS All Access and Showtime have about 4 million subscribers combined.
Swinburne seems to think it will quite profitable in the long run though, and if anyone can pull it off, Disney can.
Disney’s streaming service will launch in 2019.