According to The Wall Street Journal, ESPN, a division of Walt Disney Co. (NYSE: DIS), will start a streaming service. The company will also end a $1 billion plan to relocate 2,000 employees to Florida. Disney’s battle with the state government over control of the area around Disney’s large theme parks also continues. CEO Bob Iger has made a series of job cuts to bring down bloated expenses. Nevertheless, Disney’s stock still underperforms the market. (These are America’s 25 dying industries.)
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Disney’s stock is off 11% in the past three months, while the S&P 500 is 2% higher. Investors continued to be troubled by a decision Iger made when he was last CEO, and that did not change under successor Bob Chapek, whose job Iger then took back.
Iger decided in November 2019 to launch the Disney+ streaming service. It had Disney, Star Wars, Pixar, Marvel and National Geographic video libraries. Disney was late to the streaming business, which Amazon Prime and Netflix dominated. Disney+ was priced at $6.99 a month, about half of the price of Netflix.
Iger’s plan worked, and then it didn’t. Disney+ added subscribers at a breakneck speed and recently topped over 150 million. The problem was that, at $6.99, the streaming service was posting annual billion-dollar losses. Disney had to raise the price of the service. It has moved the cost of the non-ad-supported service to $11. However, the price increase is bound to cause some level of attrition. Iger has been trapped by his success.
Disney’s theme parks continue to be a major success. Its studio business will always be hit or miss, as is the case with all studios. Streaming was to be a powerful new leg that supported the entire company.
However, pricing is not the only Disney+ problem. The streaming field has major competitors who had little or no presence when Disney+ launched. These include products from HBO, Discovery, Paramount and Apple. Apple, in particular, has almost limitless access to cash and billions of Apple devices worldwide.
Disney’s stock is likely to lag the market for some time.
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