Walt Disney Co. (DIS) is delaying the launch of its first Marvel Studios television series on its streaming service Disney Plus, in light of the COVID-19 pandemic.
The official announcement comes after the media giant halted production on its Marvel series, The Falcon and the Winter Soldier in May. The debut of the show was supposed to be a continuing series that picked up after the movie, Avengers: Endgame. Disney was hoping to capture the success and the audience of the popular comic book movie which broke box office records with a reported 2.8 billion in revenue last year.
On July 9, Disney CEO Bob Chapek commented on the impact of the pandemic on the company’s production unit saying that he hopes that work will resume “sometime soon.”
Disney’s main attractions on Disney Plus are its Star Wars and Marvel franchises. They are also the most expensive to produce. Last year at the Vanity Fair Summit, Former CEO Bob Iger revealed that the Star Wars series known as The Mandalorian cost around $100 million to make, breaking down to about $12.5 million per episode.
The Hollywood Reporter estimated last year that Disney’s The Falcon and the Winter Soldier is its most expensive television series costing $25 million to make with an estimated six to eight-episodes per season, bringing the total to an estimated $150 million to $200 million. Disney’s overall television production budget is estimated to be at $1 billion for 2020.
On May 5, Disney revealed a loss of $1.4 billion in its second-quarter earnings. This accounts for its theme parks, retail stores, TV operations, and other divisions.
In light of the pandemic, theaters have been shuttered which has pushed many movie-goers to Disney Plus or its streaming competitors like Netflix (NFLX) or Amazon (AMZN) Prime. Netflix reported a 10.2 million increase in subscribers with company revenue growing 25% year-over-year despite missed revenue goals for the second quarter.
Disney reported 54.5 million subscribers to its streaming service which showed an increase of 28 million subscribers since the end of Q1 in December. The report also showed growth in its other streaming platforms, with Hulu at 32.1 million which was up from 25.1 million from the same quarter of the previous year. Additionally, ESPN+ had 6.6 million, an increase of 2.2 million from Q1 of the previous year.
Goldman Sachs analyst Brett Feldman sees the consumer shift to streaming over traditional cable television as a challenge to Disney’s competitors saying, “Pivoting from legacy linear business models to direct-to-consumer services strategies will be difficult.” He noted that many media companies have been reluctant to make the change, leaving an opening for others like Disney to assert their dominance. The analyst says that the pandemic will accelerate the consumer exit from cable television which will be good news for Disney. He initiated a Buy rating on the stock on July 13 and set a price target of $137 which implies 15% upside potential.
Disney’s stock is down 18% year-to-date with a Moderate Buy analyst consensus that breaks down into 8 Buy ratings versus 12 Hold ratings and 2 Sell ratings. The $122 average price target suggests 3% upside potential for the shares in the coming 12 months. (See Disney’s stock analysis on TipRanks).
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