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Disney's (DIS) Disney+ Launch in Middle East Stiffens Competition

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·3 min read
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The Walt Disney DIS recently began offering its streaming service, Disney+ in 16 countries across the Middle East and North Africa. Subscribers in the region can view thousands of movies, series and exclusive originals from Disney, Pixar, Marvel, Star Wars, National Geographic, and general entertainment from Star through the service.

Disney+’s entry into the Middle East streaming market stiffens competition. Netflix NFLX currently dominates the region with more than 6.8 million subscribers, according to data from Digital TV Research, cited by Reuters. Starzplay ranks #2 with subscribers under two million, while Amazon AMZN has roughly 1.4 million subscribers.

While Disney+ is yet to launch any Arabic show, subtitles are available for most of the content, including popular shows. However, lack of original Arabic shows can prove detrimental for Disney+ as competitors like Netflix and Starzplay are already offering and working on original Arabic content, respectively.

However, given the breadth of Disney+'s content, the streaming platform is expected to grab the second spot with a subscriber base of 6.5 million in the region by 2027, trailing only Netflix, which is likely to have a viewer base of 11 million, per Digital TV Research data. Amazon is expected to outperform Starzplay with 4.8 million subscribers to grab the third spot.

 

The Walt Disney Company Price and Consensus

The Walt Disney Company Price and Consensus
The Walt Disney Company Price and Consensus

The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote

 

Disney+'s Popularity Driving Disney’s Prospects

Disney is benefiting from the growing popularity of Disney+ due to its strong content portfolio and a much cheaper bundle offering compared with its peers.

In the last-reported quarter, Disney’s streaming services exceeded a total subscription of 205 million, a quarterly net increase of 9.2 million, driven by Disney+. As of Apr 2, 2022, Disney+ had 137.7 million paid subscribers.

Availability in the Nordics, Latin America and other Asian territories is helping it expand its user base. Thanks to its robust content portfolio, the company remains on track to achieve its guidance of 230-260 million paid subscribers for Disney+ by the end of fiscal 2024. Expansion into Middle East and North Africa will further help Disney in its cause.

Moreover, Disney continues to spend handsomely on developing its Direct-To-Consumer (“DTC”) services. Last year in November, Disney announced its plans to spend approximately $33 billion on developing DTC content in fiscal 2022. The company’s DTC services includes Disney+, Hulu and ESPN+.

Disney Stock Suffers From Rising Uncertainties

Disney shares are down 33.3% year to date compared with the Zacks Media Conglomerates industry’s decline of 24.2% and Zacks Consumer Discretionary sector’s fall of 27.6%. This Zacks Rank #4 (Sell) company has been witnessing a broader pullback in the market on concerns about inflation and other macroeconomic factors.

Disney+’s profitability is expected to be negatively impacted by higher investments in content, which will drive up programming and production costs at Media and Entertainment Distribution segment.

Closure of its Asian theme park due to coronavirus does not bode well for Parks, Experiences and Products’ top-line growth. Disney expects this to reduce operating income by up to $350 million in the fiscal third quarter.

Disney’s leveraged balance sheet also remains a concern. As of Apr 2, 2022, cash and cash equivalents were $13.27 billion against total borrowings of $46.6 billion.

A Stock to Buy Right Now

Nexstar Media NXST from the broader sector is a better-ranked stock to buy right now.

NXST sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nexstar shares have returned 13.6% year to date.


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