Wells Fargo Analyst Critiques Disney’s Streaming Strategy

Wells Fargo’s Steven Cahall has expressed concern that Disney’s streaming service is negatively impacting its stock. As of now, Disney’s shares are valued at $96, which marks a 24% decline over the past year and a significant 46% drop in five years.

Cahall suggests that if Disney shifted its focus from being just a distributor to an entity more akin to an arms dealer within the entertainment sector, its stock could potentially rise by 40%. This means creating entertainment content and then licensing that material out to platforms like Netflix and Apple TV.

Currently, Disney is keeping all its content tethered to Disney+, but it seems the streaming service might be hitting a plateau. By the end of 2025, Disney+ is projected to have 132 million subscribers, with an expected increase of 138 million users globally by year’s end.

However, it appears that by late 2024, the subscriber count for Disney+ had dropped to 154 million, down from 164 million the previous year. This decline highlights a worrying trend—Disney is pouring resources into a streaming service that is losing traction.

Cahall argues that licensing this content instead could yield billions, thereby increasing both revenue and stock value. For instance, as a Disney shareholder, if you know that a film like Toy Story 5 is likely to earn over $1 billion globally, it raises questions about why it’s being held back in the “Disney+ dead zone” rather than being farmed out for significant profits to platforms like Netflix or TBS.

Cahall points out that while Sony, a company without a streaming service, generates $1 billion annually from Netflix through production deals, Disney stands to gain nearly $4 billion. Taking into account Disney’s extensive library, licensing revenues could soar to $15 billion. “We’re not just considering box office revenues or the theme park experience,” he mentions. “Investors could benefit from a more streamlined risk-free model focused on content and distribution.”

At this moment, Disney seems to be squandering billions on a streaming service that isn’t expanding while overlooking a lucrative opportunity in content licensing.