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Analysts upgrade Disney+ subs forecast as Verizon offers promo

The Walt Disney Co.'s promotional partnership with Verizon Communications Inc. should help the media conglomerate's new streaming service garner a solid subscriber base quickly, analysts said.

Debuting in the U.S., Canada and the Netherlands on Nov. 12, Disney+ will be free for 12 months to Verizon's unlimited wireless customers as well as new Fios residential internet and 5G home internet customers. Financial terms of the partnership were not disclosed.

UBS analyst John Hodulik said the links to Verizon "de-risks" the subscriber dynamic for Disney+ over the next 12 months. Hodulik believes that with some 17 million potential Verizon residential customers through the various offers, Disney+ will exceed UBS' original forecasts of 4 million U.S. subscribers this year and 8 million by the end of its first year.

MoffettNathanson analyst Michael Nathanson in a note wrote that with the Verizon ties and other promotional offers, Disney+ will have about 8 million subscribers worldwide by year-end and 18 million by the close of its parent’s fiscal 2020. That compares with the firm's original projections of 2 million and 10 million for the respective periods.

Regular retail pricing for Disney+ is $6.99 per month and $69.99 annually. The product will also be available in a bundle along with sports streaming service ESPN+ and Hulu LLC's basic subscription video-on-demand offering for $12.99 per month.

During its investor day on April 11, Disney projected that its new streaming service would count between 60 million and 90 million subscribers, with one-third in the U.S., by the end of its fiscal 2024. Disney also forecast 40 million to 60 million subscribers for Hulu and 8 million to 12 million for ESPN+ by that same time frame.

For his part, Nathanson pegs the eligible Verizon wireless base for the Disney+ offering at 17.7 million. Assuming a 50% take rate, the analyst believes that the Verizon partnership could help yield almost 9 million Disney+ subs. He pointed to special offers to Disney fan club members and Disney Parks' guests as providing a boost as well.

SNL Image"The Mandalorian"
Source: Walt Disney Co.

Hodulik called the Disney-Verizon partnership "another example of Disney’s advantages in its effort to gain scale in [direct-to-consumer] services in the 'land grab' phase of the market."

He expects a "meaningful increase in content available" on Disney+ when the promotional period ends, which should give Verizon subscribers a good reason to convert into paying Disney+ customers.

Stateside, the service will debut with some 7,500 TV episodes, 10 original films and documentaries, 400 library movie titles, 100 recent theatrical films and 25 original shows, including the much-anticipated series "The Mandalorian," from executive producer and writer Jon Favreau.

News of the Disney-Verizon partnership comes ahead of AT&T Inc.'s Oct. 29 investor day. AT&T will reveal more details about its new streaming service, HBO Max, which is also expected to benefit from some promotional tie-ins from the telco’s vast customer relationship base.

Apple Inc., meanwhile, will premiere its streaming entry, Apple TV+, on Nov. 1 for $4.99 per month. However, the service is free for one year to those who purchase iPhone, iPad, Mac or Apple TV devices.