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Disney earnings preview: Investors eye strong subscriber growth for Disney+

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dot.LA Chief Correspondent and Former Disney Senior Analyst Kelly O'Grady joins the Yahoo Finance Live panel to discuss the latest outlook for Disney ahead of the company's earnings report on Thursday.

Video Transcript

AKIKO FUJITA: Shares of Disney rallying in the session hitting a new high today, up nearly 5% there ahead of its big earnings report on Thursday. Disney+ likely to be the big focus again, with the streaming platform already boasting nearly 90 million subscribers.

Let's bring in Kelly O'Grady. She's dot.LA's Chief Correspondent. And Kelly, we should point out, 90 million, certainly not a lot compared to where Netflix is today at more than 200 million, but Disney's put forward some really ambitious goals. Are we likely to hear any surprises when they report on Thursday?

KELLY O'GRADY: You know, I don't think that there's going to be any huge surprises. Their Investor Day, I think, was the big reveal with their streaming plan for the next three to four years, all of that content that they're expecting to release. I do think you're going to see a really strong performance when it comes to subscribers.

Third-party data is indicating that monthly active users are up significantly, likely due to "Soul" being released on the platform at the end of December, as well as an increase in usage in Latin America, specifically Brazil. You know, I do think it's interesting to think about them in context of their peers. Netflix that you just mentioned, of course, blew past their subscriber expectations, though let's be real, it's probably because of everyone's favorite show, and this show "Bridgerton," and all of their other content that they released.

So I do think you're going to see strong performance and increase in subscribers, but I wouldn't expect them to get anywhere near close to 100 million mark that some people have been throwing around. Because let's remember, that 86.2 million figure was at the beginning of December. That wasn't at the last Q3 earnings they were hovering around-- or Q4 earnings, 73 million subscribers. So I think we're going to see some strong performance on Disney+, but I'm not expecting any huge news like we saw at Investor Day.

ZACK GUZMAN: Yeah, kind of those tidbits we always tease out. I mean, we were discussing it back when we saw a few special releases on Disney+. But "Soul," another one of those that was a standout and kind of trying to tease out how much people might be willing to pay or what kind of boost are coming from, you know, title-specific moves here.

On the park side, though, that's something we've been waiting for updates as, you know, they've been able to keep COVID under control with their park in Florida. But what are your expectations on maybe how they'd frame that build back, given so many unknowns on where they go in California?

KELLY O'GRADY: So I expect to see some optimism around the parks reporting. There is a new bill that's being introduced in California that would allow Disneyland to open sooner than Governor Newsom's plan here. It would be in the tier three, orange, versus the tier four, which it is right now.

Now, that would only be at 25% capacity, of course, but we are seeing outdoor dining start to open back up here. So I do think you're going to start to see some optimism, especially with the vaccine rollout. And you know, there's-- there's been this big question, are you going to see parks rebound? Is there going to be pent-up demand?

And I think you're starting to see, especially with how Walt Disney World in Florida has done, that there is that demand. There is that increase in attendance. They've been able to move from 20% to 35%. And they're seeing the desire to go back.

And so I do think there's going to be some optimism, because this pent-up demand, if we do see this play out with-- with the continued rollout in Florida, as well as potentially in California sooner than expected, it's going to be off a leaner cost base, because they have made so many cuts in order to try and make that viable for when we are able to go back. And I mean, you know, Tom Brady and Gronk are going there today in Florida, so that's got to mean something, right?

AKIKO FUJITA: Yeah, Florida and California, very different situations right now. But you know, what you pointed to, the headwinds from the park side, has led to a lot of debate about what the stock should actually be valued off of. And to your point, look, there may be some optimism around what's to come in California, but we're still months away from really seeing the significant bounce back where people actually do go to the parks. How do you think people should, you know, look at Disney right now moving forward? Is it-- even with the parks reopening, is that really about the momentum around streaming and the potential they're likely to see with more content coming on board?

KELLY O'GRADY: I'm so glad you asked that question, because it's been something that's been giving me a little bit of anxiety when I see the stock continue to reach new heights. I think you're absolutely right that it really is around this optimism with streaming and what Disney could look like three, four years down the line versus an optimism that the parks are just going to magically be fixed overnight because they're not. We are still months out, as much as I'd like to go there for my birthday this year.

But I think there's this philosophical question of, you know, every earnings call they've released some sort of big news, right. It's either Disney+ subscriber numbers or, at their Investor Day, it's been big news around their content investment or leadership changes. And that's always been giving the stock a big boost.

Now, most of the people that are invested in Disney are playing the long game here, but it does make me question will there be some leveling at some point in the future, because at some point there's going to be no news left to release, and it's just going to be about execution. On that point, I do hope that they address this concern around how much of those Disney subscribers are Indian Hotstar, you know, subscribers within the Disney+ bucket, because that has an average revenue per user that's lower than most other countries.

So to that point about OK, there's optimism for the future, but we do need to start to think more about execution and what this is really going to mean from a profit standpoint. So I think there will still be a boost coming out of the earnings call, because there are going to be new subscriber numbers that are likely higher than we expect. But I'm not sure how long that's going to last without real hard execution behind it.

ZACK GUZMAN: Yeah, no. It's a very good point. And it's also coming as we see maybe some of those roll offs of those sign up benefits. You know, Verizon, our parent company, offering a year free of Disney and some people coming up to that to see if they want to renew and start paying themselves.

But when you look at just maybe the last point, just to return to kind of what we saw with "Mulan" and this idea of Premiere buys with "Raya and the Last Dragon," that would be the next big one, I think, that people are going to be curious about, I mean, what are you looking to see when we get those updates from Disney, if we get them this time around, around the pricing power that could come from Disney+ and how that fan base is so attached to maybe paying a premium?

KELLY O'GRADY: Sure. I mean, they had the ad during the Super Bowl. It's going to be that $30 Premiere access fee. Same as "Mulan," it's also going to be released in theaters. But March is going to be kind of tough in terms of going back to the theaters. But I am expecting them to address that.

There's a possibility that they might also highlight a couple of the other films. I mean, "Black Widow's" coming in May, "Jungle Cruise," I believe, is coming in July. Those are supposed to be big tent pole movies for them. But I'm really hoping that they give us some data on "Soul," because that will be able to inform, potentially, how "Raya" might do, even though "Soul" was free on the platform.

But also, if they do decide to take some of those movies, depending on how we are in, you know, in a bad way or a good way come the summer, what we might expect in terms of that purchasing power. Because you're right, there's many subscribers, but that extra $30 fee is going to be tough, unless you contextualize it in the fact that, yeah, you know, you'd be buying popcorn, you'd be buying movie tickets for a family of four. So when you think about it that way, it's actually not that bad. But I think that $30 sticker price does create a lot of anxiety for potential purchasers.

ZACK GUZMAN: Yeah, a lot of-- a lot of tidbits to keep our eyes peeled for when we get that later on in Disney's earnings. But Kelly O'Grady, dot.LA Chief Correspondent, appreciate you coming on here to chat, as always.