Rich Greenfield, an analyst at Greenfield Research, said on Thursday that a new subscription tier for Disney’s (NYSE:DIS) streaming service funded by advertisements signifies a pivot for the firm, as the company’s goal is turning from aggressively acquiring subscribers to achieving profitability.
“This is Disney understanding they are very mature, meaning they’ve reached most of the people who are going to pay for Disney+ and now pushing hard on pricing,” the LightShed Partners co-founder told CNBC.
The remarks followed news that Disney+ had introduced a $7.99 ad-supported tier, $3 cheaper than the ad-free edition of the program.
Greenfield stated that the Disney+ service had lost $4B over the last year, prompting him to conclude that “they need to bring this to profitability.”
The LightShed co-founder noted that Disney+ consumers would likely pay a premium fee for the service because of the “sticky” nature of the family programming. He said that demand from marketers looking for fresh inventory on streaming platforms would also help the firm.
More generally speaking, Greenfield pondered how the recent leadership shift at the entertainment behemoth would affect its broader strategy with Bob Iger returning to the helm. The analyst claimed that Disney stock would benefit from a closer emphasis on its core sectors rather than seeking to broaden its services.
“It does seem like Disney is best suited to simply being more narrow and truly controlling it, maybe selling Hulu, getting out ESPN,” he added.
Greenfield said that the robust demand for Disney’s theme parks despite price hikes was evidence for his point of view.
The stock of DIS has recovered from its 52-week low of $86.28 to trade at $92.30 on Thursday. However, the company lost about 40% of its value during the previous 12 months.
Meanwhile, a streaming competitor, Netflix (NASDAQ:NFLX), fell early in the year but has been slowly rising in recent months. Although the stock price has increased by over 80% since June, it is still down 51% year-over-year.
For more on Bob Iger’s comeback, read why SA writer Steven Mallas writes, “Disney stock remains a long-term purchase, but average-in cautiously during the bear market.”
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