Summary
- DIS shares returned an impressive 26% for the quarter as the company unveiled its plans to launch Disney+, its Netflix-style streaming service, and to grow Hulu and ESPN+.
- In addition to its deep library of media assets, Disney has a consistent and highly profitable parks business, its best-in-class studio segment, and its consumer products division, each of which are thriving.
- Disney is a well-positioned company that, prior to its investor day, traded at a significant discount to the broader market. We maintained our position during the quarter and DIS is a core holding in the Fund.
The following segment was excerpted from this fund letter.
Disney: DIS shares returned an impressive 26% for the quarter as the company unveiled its plans to launch Disney+, its Netflix (NASDAQ:NFLX)-style streaming service, and to grow Hulu and ESPN+. DIS is blessed with distinctive content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands including Disney, Marvel, Pixar and Lucasfilm (the Star Wars franchises), as well as the ABC network (providing deep inventories of stories and characters). We believe that, as the owner of such an expansive library of proprietary content, Disney is among the best positioned media companies in the new landscape combining multi-channel and direct-to-consumer distribution. Based on an expected price of $7 a month for Disney+ and the company's projection for a subscriber base of 60-90 million people by 2024 (about half of each of Netflix's 150 million subscribers and the 150 million people that visit Disney parks annually), Disney should add $5-$7.5 billion in incremental annual revenue (an 8%-13% boost to 2018 revenue). On top of that, management expects ESPN+ and Hulu to add an additional 50-70 million subscribers.
