JPMorgan have warned that Disney is facing more financial uncertainty in the near future as a result of its streaming ambitions that aim to challenge Netflix.
An analyst focused on Disney’s spending on new platform Disney+, and highlighted the integration of 21st Century Fox film and television assets, describing it as ‘choppy’.
In acquiring Fox, Disney hopes to have a boosted content library and therefore a better chance of taking on other media giants such as Amazon, Apple and Netflix. For example, the deal has given Disney such franchises as The Simpsons, Avatar and X-Men, which will go on top of its existing portfolio containing big names such as Star Wars and Avengers.
However, Disney CEO Bob Iger said that Fox films had had a negative impact on an otherwise record year for Disney studios, telling analysts that performance from the Fox studio was ‘well below where it had been, and well below where we had hoped it would be when we made the acquisition.’
Factors such as the above, as well as layoffs negatively contributing to morale at Fox alongside 2019 movie releases performing poorly, led to the JPMorgan analyst cutting her Disney earnings estimate for the fourth quarter from $1.05 a share to 95 cents. She has also cut her EPS estimate from $6.30 to $5.50 for fiscal 2020, which is below the Wall Street consensus of $5.72.
Speaking of Q4 estimates, she said ‘we tweak [them] at the Studio segment, mindful that the Fox films likely underperformed again this quarter, slightly offsetting stellar Lion King results.’
Overall, JP Morgan expects Disney+ to achieve 75 million global subscribers by the close of fiscal 2024. In comparison, Disney itself has forecast 60 to 90 million subscribers by 2024, while Morgan Stanley has estimated 70 million by this date. Meanwhile, Netflix has around 149 million global subscribers.
