In the world of streaming video, the 200 million subscriber club currently has only two members: Netflix (NASDAQ:NFLX), the pioneer in the space, and Amazon (NASDAQ:AMZN) which offers Prime Video as an extra perk to members who sign up for its Prime loyalty program.
Although Disney (NYSE:DIS) only launched its newest streaming service Disney+, in November 2019, it is catching up to the leaders fast. In March, it reported that Disney+ had surpassed the 100 million subscriber mark, and its rapid growth has investors asking if its total figure across its services (including Hulu and ESPN+) could hit the 200 million threshold in 2021?
The streaming competition has a new top-tier player
As of April 3, Disney reported having 159 million subscribers across its three services: Disney+, Hulu, and ESPN+. Netflix reported 207 million subscribers as of March 31, while Amazon said the number of Prime members had topped 200 million as of March 31.
However, Disney is adding subscribers at a much more rapid pace. Its subscriber total was 73.5 million a year prior. Undoubtedly, that growth was fueled by a public hungry for entertainment options while cooped up at home for most of 2020 avoiding potential exposure to a global pandemic. Now, though, states across the U.S. are easing restrictions as new coronavirus infections in the country trend lower. As a result, more people are getting out more often and, invariably, watching less streaming content. That raises concerns for all three streaming services.
In many parts of the world, countries are not as far along in their vaccination campaigns as the U.S. is, and some are again turning to temporary lockdowns and restrictions amid new surges in COVID-19 cases. As a result, international demand for streaming services could remain high for the rest of 2021. That could help Disney climb closer to the 200 million subscriber mark as the service is still only in its early stages of rolling out the service internationally.
Disney management last laid out its projections for subscriber growth at the company's investor day on Dec. 10, 2020, saying that it expected the company to have between 300 million and 350 million subscribers across its three services by the end of its fiscal 2024. At the midpoint, that would be more than double its current total of 159 million.
If that growth occurs on a straight-line basis, Disney would need to add roughly 50 million subscribers each year. Another way to look at it would be that, with 14 quarters remaining until the end of its fiscal 2024, it will need to add those customers at a pace of a bit over 10 million per quarter.
What this could mean for investors
While it's possible that Disney's streaming family could reach 200 million subscribers by the end of 2021, it's unlikely. The pace of subscriber growth will remain affected by coronavirus trends for at least the rest of the year. If countries like India can't get a grip on the virus in other ways and need to impose more lockdowns, that could lead to more people signing for Disney+.
Either way, the growth of Disney's streaming services has been impressive. The service is supplementing the entertainment giant's revenues from its other businesses, many of which took significant hits during the pandemic. It is also providing a degree of insurance for the company should new waves of COVID-19 overtake parts of the world again.