Disney + (NYSE: DIS) just beat another record.
The five-month-old streaming service now has 50 million members after launching in Europe and India in the past two weeks, up from around 30 million two months ago. The news delighted investors, pushing the stock up 7% after hours, and was the last sign that the service is “killing” expectations. When it announced the new streaming service last year, Disney predicted that it would have 60 to 90 million members and be profitable by 2024. The entertainment giant now looks set to finish 2020 in this lineup subscribers, which should also mean that it will turn a profit much sooner than expected. It’s a boon for a discretionary consumer business suffering from the closure of its theme parks, a lack of sports to broadcast on ESPN, an inability to produce films and live television, and cinemas that darken.
However, the most impressive part of the growth of Disney + blockbusters may be that the company has already signed 8 million subscribers in India, a key growth market, less than a week after its launch.
Image source: Hotstar.
The largest democracy in the world
India has an estimated population of 1.37 billion and will soon overtake China as the most populous country in the world. As a communist country, China has walled in on US tech companies, including streamers like Netflix (NASDAQ: NFLX)and sources of information like Facebook and Google. This means that for tech companies, especially those that rely on users and subscribers, India’s addressable market is by far the largest in the world, four times the size of any other country in the world (the states United are the second largest democracy with around 330 million inhabitants).
According to the International Monetary Fund, India is the fifth largest economy in the world in terms of GDP but is growing faster than Western economies. Some forecasters, including the British bank Standard Chartered, expect the Indian economy to be larger than the American economy in just ten years, which is why India has become such a sought-after market for American titans like Amazon (NASDAQ: AMZN), Walmart, and Apple.
However, in the streaming battle, Disney seems to have the edge. Netflix, the world leader in streaming, does not distribute membership by country. But in its Asia-Pacific region, which includes major markets such as Japan, South Korea and Australia as well as India, the service had only 16.2 million subscribers, despite its launch in 2016 or before. Asia-Pacific has the fewest subscribers in its four regions, and Netflix seems to have had a particularly slow start in India, ending 2019 with around 2 million subscribers, according to industry analyst Media Partners Asia .
According to IHS Markit, Amazon, whose Prime service offers other benefits, such as free two-day delivery and streaming, has approximately 4.4 million subscribers in India. The e-commerce giant has so far invested more than $ 5 billion in India, which is no secret to him: India is a precious price.
A card in his sleeve
Disney marked a multitude of valuable assets in its deal with Fox, including cable channels FX and National Geographic, film studios including the 20th century, majority control of Hulu and the ensemble the Simpsons catalog. One of the most overlooked assets, however, could be the Hotstar cable and the streaming network in India. The service has 300 million users thanks in part to its streaming rights to popular Indian Premier League cricket games. Disney has made Disney + available by bundling it with Hotstar. An annual Hotstar subscription costs approximately $ 13 per year, while Hotstar with Disney + costs approximately $ 20 per year.
Like Amazon, Disney has adopted a strategy of market penetration, aiming to collect subscribers at an affordable price and to worry about making them profitable later. In comparison, Netflix charges higher prices, in line with those in more developed countries, and has chosen to target the most profitable subscribers first, since streaming is the company’s only activity.
This seems to be another benefit for Disney. With its ecosystem of theme parks, box office outlets and consumer products like toys, the company can take advantage of the streaming service not only as a new source of income, but also as a means of building affinities. and demand for its brand as a whole, which drives activity to its other segments. Disney + subscribers around the world will be more likely to buy Baby Yoda toys, go to the next “Frozen” movie in theaters, or spend a vacation at one of the Disney parks (when they reopen ).
With its Hotstar ownership and a launch that drew 8 million registrations in less than a week, Disney seems to be the undisputed favorite of what is arguably the most important growth market in the world. For the beginner in streaming, this is no small feat.
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John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of directors of The Motley Fool. Jeremy Bowman owns shares of Amazon, Netflix and Walt Disney. Motley Fool owns shares of Amazon, Netflix and Walt Disney and recommends the following options: long calls from January 2021 to $ 60 on Walt Disney, short calls from April 2020 to $ 135 on Walt Disney, short calls from January 2022 to $ 1,940 on Amazon and long January 2022 $ 1,920 call on Amazon. The Motley Fool has a disclosure policy.
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