Analyst: Disney Could Be Next Big Subscription VOD Provider

Disney Logo - H 2011

Disney Logo - H 2011

Sanford C. Bernstein's Todd Juenger says the conglomerate could re-imagine its "sleepy SVOD service" once its Starz output deal ends in 2015 to unlock a "hidden treasure."

A Wall Street analyst suggested on Tuesday that Walt Disney could be the next big subscription VOD provider.

"The time is ripe for Disney to re-imagine their sleepy SVOD service (Disney Family Movies) into a full-blown, premium Disney-branded SVOD service," Sanford C. Bernstein's Todd Juenger said in a report. "Full realization would likely require abandoning the Starz output deal," which ends in 2015.

Calling the company's SVOD business opportunity a "hidden treasure," Juenger suggested that DFM's earnings "would be easily superior" to the Starz licensing fee as the company would break even relative to the Starz deal at 4 million subscribers. "At 12 million subs, DFM would add $475 million incremental operating income (17 cents per share)," he said.

But Juenger also suggested that if Disney ended its output deal with Starz, "a chain reaction would be set in motion" that could affect various entertainment and digital players.

"Would Starz abandon majors (a la Showtime) or redouble around Sony/Universal?" asked the analyst. "Netflix would face a mighty competitive entry, but could maybe pick up Sony or Universal movies."

Twitter: @georgszalai