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All Eyes Shift to Disney’s Streaming Services with Rest of Business on Hold

It’s tough to find a brand or industry that hasn’t been affected by COVID-19 and the resulting quarantines that have upended our daily lives. But media and entertainment behemoth Disney finds itself dealing with more headwinds than most.

On top of the obvious issues for TV and movie production across the board right now, Disney also makes quite a bit of money on physical retail sales and global theme park admissions, hotels and cruises, plus live sports by way of ad revenue from the ESPN family of networks. With so many aspects of Disney’s business on hold, UBS analyst John Hodulik lowered his rating on the company’s stock to “neutral” (from “buy”) on Monday.

Theme parks, in particular, are a motivating factor for Hodulik, who notes January 2021 as the assumed reopening timeline for now, and sees economic pressures on that business even beyond that date.

Given all of that, the focus now shifts almost entirely to Disney’s streaming properties, which are now front-and-center for how it powers through the current difficulties.

Looking across all streaming service ads, (Disney-owned) Hulu and Disney+ are top two brands, in terms of media value* from March 9-April 19 according to iSpot.tv. This past week alone, the two brands had a total media value of about $12.5 million — 40% of the total for streaming service media ads.

*note: media value is utilized instead of ad spend, to account for streaming advertising that appears on owned networks (Disney+ ads on ABC/ESPN) which is not paid for in the traditional sense. Media value measures how much advertising is worth, rather than how much the ad placement actual costs.

Though both services could have some newer shows potentially hit by production delays down the road, the short-term outlook with increasing TV audiences (and especially increasing streaming audiences, as VIZIO’s seen streaming platform audiences increase by 57%) has both situated well. The majority of video inventory on Disney+ and Hulu is made up of “older” shows and movies, and while audiences like NEW, but that can sometimes just mean new for THEM.

Disney+ also has the advantage of a global rollout only in its infancy — and yet, it’s already at 50 million paid subscribers (or at least that’s what the company claims). Between that potential upside, kid-friendly entertainment options, a roster of bingeable shows there and Hulu, and access to popular movies from Disney/Pixar/Marvel/Star Wars, it certainly would seem that streaming is Disney’s way out of this.

Still, there are potential headwinds. Netflix has clearly been dominating the market and is now worth more than Disney — despite no ads, no theme parks or hotels or retail stores or cruises. As mentioned, Hulu and Disney+ are in decent shape from a content perspective for now. But production delays could harm release calendars for the second half of the year, too.

While every studio has release issues right now, it’s an especially concerning proposition for Marvel, which has already had to delay its ambitious “Phase 4” film slate back to deal with movie theater closures. With those movies set to take cues from the Disney+ shows like planned 2020 releases The Falcon and the Winter Soldier and WandaVision, any issues on the TV production side could provide even more headaches for Marvel’s interconnected narratives. Disney+ has (in part) banked on subscriber bumps for those shows and subsequent Marvel programming additions on the service.

If live sports return soon and there’s something resembling a “normal” TV production schedule for fall 2020, some of this pressure squarely on Disney streaming will subside. But if not, there are likely to be a lot of eyeballs on exactly how Hulu and Disney+ are able to both compete with Netflix and evolve to be the flag bearers (even if temporarily) for Disney as a company. How successfully those streaming services navigate these next 3-6 months could mean quite a bit for how Disney — and potentially, the entertainment industry overall — comes out of this rough patch.