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ETFs to Gain as Disney+ Sees Solid Subscriber Growth

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The Walt Disney Company DIS is witnessing overwhelming response for its Disney+ streaming service. Disney Plus, which comprises films and TV shows from Disney, Pixar, Star Wars and National Geographic, now has more than 50 million subscribers since its launch five months ago. Notably, Disney+ had originally aimed for around 60-90 million subscribers by the end of fiscal 2024, at the time of its U.S. launch. After making the announcement about Disney+ subscription growth on the evening of Apr 8, Disney’s shares rose 7% on Wall Street.

Notably, in November 2019, Disney began offering a bundled subscription package of Disney+, ESPN+ and Hulu, which has a lower average retail price per service compared to the average retail price of each service on a standalone basis. Notably, by the end of the fiscal first quarter, the Disney+ streaming service had 26.5 million paid subscribers and 28.6 million subscribers as of Feb 3. The subscription growth in the quarter outpaced analysts’ expectations.

As increasing number of people are spending time at home, in line with social-distancing guidelines due to the coronavirus pandemic, they are resorting to streaming in-house entertainment content. Thus, various streaming service providers should be witnessing a rise in subscription growth. Disney Plus has also been launched in the U.K. and other parts of Europe last month. Moreover, Disney Plus recently hit India’s markets, where it has already seen eight million new subscribers. Disney Plus is scheduled to be launched in Japan and Latin America by the end of 2020.

However, the battle to the top spot among streaming service providers will be long for Disney Plus as it competes against some major players like Netflix NFLX and Amazon Prime Video AMZN, with subscriber bases of more than 167 million and 150 million, respectively. But, the start for Disney Plus looks overwhelming. According to Chris Fenton, a movie industry analyst "what Disney Plus has achieved in five months took Netflix seven years" (read: Is It the Right time to Buy Netflix ETFs?).

ETFs in Focus

The mixed results could have a huge impact on ETFs, especially funds that have the largest allocation to this media and entertainment conglomerate.

iShares Evolved U.S. Media and Entertainment ETF IEME

This actively-managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 88 stocks in its basket, Disney occupies the fifth position with 5.5% share. The fund has accumulated $6.3 million in its asset base and charges 18 bps in annual fees (read: ETFs to Ride on Rising Gaming Fervor Amid Coronavirus Scare).

Multifactor Media and Communications ETF JHCS

This ETF follows the John Hancock Dimensional Media and Communications Index, which targets a wide range of U.S. media and communication stocks to exploit the sector's opportunities. It holds 55 stocks in its basket, with DIS taking the sixth spot at 5% share. JHCS has AUM of $18.6 million and charges 40 bps in annual fees (read: ETFs to Gain on Disney's Q1 Earnings & Solid Subscriber Growth).

iShares U.S. Consumer Services ETF IYC

This ETF offers exposure to U.S. companies that distribute food, drugs, general retail items and media by tracking the Dow Jones U.S. Consumer Services Capped Index. It holds 156 stocks in its basket, with Disney taking the fifth spot at 4.3%. The fund has amassed $731.5 million in its asset base. It charges 42 bps in annual fees from investors.

The Communication Services Select Sector SPDR Fund XLC

This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $6.95 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Disney occupying the tenth position at 4.32%. The product charges 13 bps in annual fees.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
iShares U.S. Consumer Services ETF (IYC): ETF Research Reports
 
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
John Hancock Multifactor Media and Communications ETF (JHCS): ETF Research Reports
 
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