Disney's Streaming Service Worth Estimated $25 Billion

Disney is betting big on its new streaming service, and the latest estimates show how rewarding the venture might be.

In Morgan Stanley analyst Benjamin Swinburne's latest research note, he estimates that once the streaming service hits 30 million subscribers, it could generate 5 billion in revenue and 1.5 billion in EBITDA (earnings before interest, taxes, depreciation, and amortization.) That results in a $20 to $25 billion dollar worth for Disney's latest asset.

"Disney's brands and content depth and breadth give it a unique opportunity among existing content producers to build a large global customer base in a direct to consumer streaming model," Swinburne wrote.

Disney surprised many by ending their exclusive deal with Netflix in 2019, which has been highly profitable for the company. Swinburne doesn't think it will have a problem pulling 10 to 12 percent of Netflix's subscriber growth by 2028. That would mean Disney would hit that 30 million subscriber number somewhere over the next ten years.

The Disney service will certainly come out of the gate strong. Once the Netflix deal ends it will have a wide variety of properties to pull from. Disney Channel, core Disney, Pixar, Marvel, and Star Wars movies and television shows will give it a large and popular catalog right from the start, and 2019 is shaping up to be another big year for all of those, so it should launch with some momentum.

Still, it is a heavy investment to get things up and running for a brand new service, and that includes the money lost from current licensing deals with streaming services. Disney brings in over $500 million just from that, and their TV licensing division hits around $2 billion per year.

That means when all expenses are tallied and the service's $9 per month fee is considered, it will need to hit 32 million subscribers to break even. For context, Netflix currently surpassed 100 million subscribers, while HBO Now has about 3.5 million subscribers and CBS All Access and Showtime have about 4 million subscribers combined.

Swinburne seems to think it will quite profitable in the long run though, and if anyone can pull it off, Disney can.

Disney's streaming service will launch in 2019.

H/T Investopedia