Disney rockets to record on blockbuster streaming service launch

Shares of The Walt Disney Company rocketed to a record high in New York trading today after the media behemoth announced that its new Disney+ streaming service amassed an astounding ten million subscribers just days after the product was made available to the general public in the US and Canada.

While the reaction to the news was euphoric, a deeper look at the numbers brings up big questions about just how profitable those ten million new subscribers are, if at all. Disney earlier this year reached a deal with mobile phone giant Verizon, the largest carrier in the US, to offer Disney+ free to Verizon's 38 million customers in exchange for a 'wholesale rate', which is likely significantly below the $7.00 monthly price tag to the general public. Disney did not break out the Verizon subscriber numbers.

Nevertheless, the ten million number is unprecedented - it took HBONow four years to reach that level - and streaming market leader Netflix took it on the chin in New York trading, falling nearly 5%, as investors switched out of Netflix stock and into Disney stock.

In after hours trading, Walt Disney Co (All Sessions) was up over 9% from the previous day's close.

Titanic struggle

In one of the most titanic corporate sagas of recent decades, deep pocketed giants like Apple, Disney, Comcast, Warner and others are piling into streaming, seeing those services as absolutely crucial to their survival. All seem willing to spend whatever it takes to survive the emerging streaming services war, which perhaps none will win. And most are likely to come out severely wounded.

A result of all the competition has been a huge film and TV production bubble as media players spend big on original content to entice subscribers. Competition for top producers, actors and writers is red hot, with exhorbitant sums being spent on big Hollywood names. And there have been a flurry of unknowns who have found themselves suddenly raking in millions when their film or show pitches become hot and bidding wars break out.

So far, Disney's profit track record is not good when it comes to streaming. Its Hulu service, available now for two years, has piled up nearly a half billion dollars in loses. And it's unclear whether streaming can replace Disney's rapidly declining bundled cable service product lines, as well as its other declining traditional media properties like the ABC television network.

Big cash flows

Nevertheless, Disney has enormous cash flows coming from its film business - it owns Marvel, Star Wars and Pixar, as well as the hugely profitable family film franchise. Earlier this year, in a blockbuster acqusition, Disney acquired 20th Century Fox's media assets. There are also the massively profitable theme parks.

These are very deep and diversified pockets indeed when compared to streaming one-trick pony Netflix, which is burdened with significat debt. But Netflix has a big lead with 160 million subscribers, and Disney's own forecast is for just 120 million Disney+ subscribers in five years.