Netflix has been criticized by Wall Street. Is Disney next?

disney (SAY) is set to report its first quarter results on Wednesday and Wall Street’s eyes will once again be on the growth of Disney+ – the most important part of the company’s media empire. And this trimester will be even more watched than usual.
Disney just released an earnings report in November that showed its streaming growth slowed in the fourth quarter. That sent Disney shares down as much as 8.5% the morning after the report. Its stock also fell from a record high of $203 per share last March to $142 per share on Tuesday.
Be certain, disney (SAY) and netflix (NFLX) are very different companies, mainly because Disney’s business is much more diverse, spanning theme parks, cable networks, merchandising and movies.

Still, Disney made its bet on streaming, and just like Disney+, so did the rest of Disney. If the service is struggling to attract subscribers, Wall Street doesn’t really care how many people have bought Baby Yoda plush dolls or tickets to Disney World.

Disney CEO Bob Chapek said following November’s results that the company continues to run its direct-to-consumer business, which includes Hulu and ESPN+, for the “long term.” He also noted that the company is “confident that our high-quality entertainment and expansion into other markets around the world will allow us to further develop our streaming platforms globally.”
Disney+’s subscriber count has dropped significantly since hitting 100 million subscribers last year. In the fourth quarter of 2021, for example, Disney+ only saw two million new subscribers, a sharp drop from the 12 million it added in the third quarter.

Disney will also face the possibility of disappointing the market like Netflix did last month with its own lackluster earnings reports. Netflix’s stock fell 20% when it announced it had 221.8 million subscribers worldwide, but forecast growth of just 2.5 million for the next quarter.

Still, there are reasons to be optimistic about Disney.

What Disney+ needs more than anything: a success

The service has been full of popular content over the past few months. There was “Hawkeye,” Marvel’s new series about the avenging archer, and “The Beatles: Get Back,” an eight-hour documentary about the recording of Peter Jackson’s band’s latest album.

Hit movies like “Shang-Chi and the Legend of the Ten Rings” and “Jungle Cruise” have also been added to the service. Later in the quarter, so did the animated musical “Encanto” and “The Book of Boba Fett,” a new series in the Star Wars franchise.

Jessica Reif Ehrlich, analyst for Bank of America, expects Disney+ to report that it added seven million subscribers this quarter due to this type of content. Still, Ehrlich notes that the service may need to continue expanding its offerings in order to attract even more subscribers.

“With the success of ‘The Beatles: Get Back’, we wouldn’t be surprised if [Disney] diversifying their content production beyond their traditional brands (e.g. Marvel, Star Wars, Pixar and Disney) to broaden the reach and appeal of the service,” she wrote in December.

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