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Disney: Look Here For Growth

Summary

Late last year, Disney launched a direct-to-consumer subscription-based streaming service and app - DisneyLife.

DisneyLife is special because of its niche market and rich globally recognized content.

Besides being different, DisneyLife is a cost-efficient and optimal margin expansion strategy for Disney to maximize revenues from its content and its IP portfolio.

DisneyLife - What is it?

After ESPN's subscriber numbers started to decline, there have been a series of bearish sentiments aiming at Disney's (NYSE:DIS) lack of diversification. These bearish sentiments were answered, in part, by Disney's effort to launch a direct-to-consumer subscription-based streaming service and app in the United Kingdom - DisneyLife.

DisneyLife can be accessed through a dedicated app on tablets, smartphones and TV streaming boxes like the new Apple (NASDAQ:AAPL) TV. The Netflix (NASDAQ:NFLX)-like service lets families of up to six stream Disney movies, TV shows, music, audiobooks and e-books online. DisneyLife gives subscribers access to classic Disney-animated movies and the entire collection of Pixar-animated films.

According to Corey Robertson from The Disney Blog, Disney has plans to expand DisneyLife to other markets such as France, Spain, Italy and Germany starting this fiscal year. But based on a recent comment by the CEO at the Deutsche Bank 2016 Media, Internet and Telecom Conference on March 8, DisneyLife has not yet fully taken off.

DisneyLife - Thesis

We believe DisneyLife will be a margin growth story that will enable Disney to diversify its revenue stream from selling content to Netflix and from its gains in its 33% stake in Hulu to selling content directly to consumers.

DisneyLife Creation - Rationale

Many companies have started selling content directly to consumers to compete with online rivals who are disrupting traditional television business models and transforming the way that people watch TV.

A few companies, who have original content, already package their content and sell it directly to consumers. Aside from well-known media companies such as Netflix, Hulu and Amazon (NASDAQ:AMZN), niche players have entered the market with original content. These niche players include the World Wrestling Entertainment's (NYSE:WWE) WWE Network, HBO's (NYSE:TWX) standalone Internet streaming service and Major League Baseball's MLB.TV etc.

We believe the decline in ESPN viewership and the need to diversify revenues was one of the major catalysts for Disney's decision to launch DisneyLife.

"Let me first of all -- I think putting it in perspective a little bit, what we're seeing in the marketplace today is not that different than what...


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