Disney/Lucasfilm
"The Mandalorian" will be Disney+'s first live-action "Star Wars" TV series.
- Morgan Stanley forecasts that Disney will have more US streaming subscribers than Netflix within five years.
- While US subscriber growth is slowing at Netflix, Disney will have control over three subscription services by the end of 2019 - Hulu, ESPN Plus, and Disney Plus.
- The Wall Street firms raised its estimates for Disney Plus' subscriber growth, after seeing the global rollout plans and how quickly Disney will be cranking out content tied to popular brands like Marvel, Star Wars, and Pixar.
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Disney could win the US streaming war within five years, Morgan Stanley estimates. But Netflix will still dominate globally.
By 2024, Disney will have more streaming-video subscribers than Netflix in the US, Benjamin Swinburne, an analyst at Morgan Stanley, estimated in a note on Thursday.
The legacy-media giant is forecasted to reach about 95 million US subscribers across Hulu, ESPN Plus, and Disney Plus within five years, which is more than Morgan Stanley previously expected, the note said. Morgan Stanley estimated that Netflix will have 79 million US subscribers by that time.
People already spend billions on content heading to Disney Plus
The firm raised its estimates for Disney's subscriber growth because it now expects Disney Plus to launch faster globally than previously thought, and found that the company is quickly building content for its streaming services that leans on popular Disney brands like Marvel, Star Wars, and Pixar.
People are already spending tens of billions a year on content that will be headed to Disney Plus.
"Stepping back and admittedly taking the long view, investing in Disney shares is a play on the durability of its IP," the note said. "Encouragingly, consumers are already voting with their wallets today, spending an estimated $15-20 billion a year for movies and TV product that will ultimately make its way to Disney Plus."
Shares of Disney jumped as much as 3% on Thursday after Morgan Stanley published the note, in which it also boosted its price target for the stock.
Read more: Disney jumps after Morgan Stanley boosts its outlook for Netflix competitor Disney Plus
The three-pronged approach
Disney's three-pronged approach to streaming video could be key to toppling Netflix's streaming dominance. By the end of this year, Disney will have control of three streaming services - Hulu, ESPN Plus, and Disney Plus, which launches later in 2019. (Disney has full voting control over Hulu and is expected to have full ownership in five years, as Comcast pledged to sell its stake.)
Already, Hulu and ESPN Plus will have roughly 30 million paid subscribers in the US this year, or about 20% of the major streaming-video subscriptions in the country, Morgan Stanley estimated. Most of those subscriptions will be from Hulu, which Morgan Stanley expects to keep growing heartily.
Hulu will have about 54 million subscribers in 2024, and Disney Plus and ESPN Plus combined will have roughly 41 million - for a total of 95 million paid subscribers, Morgan Stanley forecasted, based on its analysis and Disney's own guidance for subscriber growth.
Domestic versus international growth
Netflix's US subscriber growth is expected to be more modest, reaching 79 million paid subscribers, up from an estimated 63 million this year. Netflix's subscriber growth has slowed in the US, and the company is shifting some of its focus overseas. International subscribers are now both the fastest growing and the largest share of Netflix members.
Morgan Stanley still expects Netflix to be bigger than Disney's streaming services globally within five years. It forecasts that Netflix will reach 280 million paid subscribers in 2024, while Disney will have about 130 million across its three services.
Disney Plus, which Morgan Stanley estimates will reach 70 million subscribers globally by 2024, may grow slower abroad, where subscription streaming is still a relatively small part of the overall TV market and people may be less willing to spend money on new services.
"The global opportunity for Disney Plus is significant as it goes to market with a brand and IP advantage, but faces questions on execution and quality of content," the note said.
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