Marvel Studios/Disney
"Avengers: Infinity War"
- Barclays analysts believe Disney could reach 170 million subscribers by 2025 between Disney+, Hulu, and ESPN+.
- Anything less "would be a disappointment for investors" given the high expectations, analysts said.
- Wall Street analysts have projected Disney+ will hit an impressive number of subscribers over the next five years, but have also stressed potential hurdles Disney will have to overcome in the streaming war.
Between its three streaming efforts, Disney has a chance to catch up to Netflix, according to Wall Street.
Barclays analysts said in a report released on Wednesday that Disney's upcoming streaming platform, Disney+; Hulu, which it now owns 60% of after the Fox merger; and its sports streamer ESPN+ have the potential to reach a combined 170 million subscribers by 2025.
Anything less than that "would be a disappointment for investors" given the high expectations, the analysts said.
"We believe the global [total addressable market] for Disney+ is 455mm and the company has the potential to add 170mm subs between Disney+, Hulu, and ESPN+ by 2025 using relatively conservative assumptions," analysts said. "If borne out, this would make Disney's OTT comparable in scale to Netflix and Amazon. Given the build-up in expectations, anything less (or silence on TAM) would be a disappointment for investors."
Hulu has over 25 million subscribers in the US after exceeding expectations in 2018 and gaining on Netflix, which has 60 million US subscribers and 139 million subscribers worldwide. ESPN+ has over 2 million subscribers after launching last April.
In an October report, Morgan Stanley analysts estimated that Disney+, which is expected to launch later this year, would gain 23 million subscribers by 2024, and between 40-45 million by 2028. In a January report, UBS analysts projected it could reach 5 million subscribers in its first year, and a less conservative 50 million subscribers within five years.
But while expectations are high, Disney+ could face some challenges.
"Disney currently benefits from an optimized wholesale distribution model the economics of which will be difficult to replicate in a fragmented retail world," the UBS analysts said.
In an October report, Barclays analysts saw a number of potential hurdles Disney will have to overcome as it jumps into the streaming war. Most notably, the analysts see Disney's multiple streaming offerings as "reductive" until it figures out pricing and bundling plans.
"In our opinion, Disney's approach to OTT in the form of three separate services is reductive and is akin to launching networks for different demographics on television which is now essentially being replicated on the internet," the analysts said. "This is likely to limit its market opportunity and increase its operating and capital costs over time relative to a simplified one service approach (at least for non-sports content)."
In Wednesday's report, Barclays analysts said Hulu "should pivot to an Amazon-like model for video."
"We believe a more scaled model would be for Hulu to serve as the aggregation brand for Disney while Disney+ serves as the entertainment brand," the analysts said. "In this vision, Hulu would essentially offer not just its library but also Disney+, ESPN+ and potentially thirdparty services such as CBS All Access, Viacom's Pluto TV initiative, HBO Now, Showtime OTT, etc. similar to Amazon."