Disney Streaming Viewership Stagnates Despite Growth Plans, Reinforcing Cautious Stance

What happened

Disney's streaming subscriber count has increased, but its US viewership share has not kept pace, with free services like YouTube growing faster, indicating potential engagement challenges. The DeepValue report notes that streaming turned profitable in the June 2025 quarter with a $346 million profit, a key milestone in the company's transition. However, at a current price of ~$112, Disney trades at a 48% premium to the DCF anchor of $76, suggesting limited margin of safety for investors. Management plans to integrate Hulu into Disney+ and launch ESPN's premium DTC service to jump-start growth, but these efforts face intense competition and execution risks. This viewership stagnation raises critical questions about the depth of user engagement and long-term advertising revenue potential, compounding existing uncertainties.

Implication

Stagnant US viewership share suggests Disney's streaming growth may rely on shallow subscriber additions rather than deep engagement, potentially capping per-user revenue and advertising upside. This issue could delay the full profitability of DTC services, especially as the company shifts focus to profit metrics and away from subscriber reporting. Coupled with high sports rights costs and regulatory overhangs for ESPN, it adds another layer of uncertainty to the already risky streaming transition. While Experiences remain the primary profit driver, their macro-sensitivity means streaming's performance is crucial for overall earnings resilience and valuation support. Therefore, investors should prioritize monitoring engagement metrics and wait for concrete evidence of sustainable profitability before considering an entry, given the stock's premium pricing.

Thesis delta

The news on stagnant viewership does not fundamentally shift the 'WAIT' thesis but underscores and amplifies the execution risks already identified in the DeepValue report. It highlights that subscriber growth alone may not secure strong engagement or advertising revenue, potentially prolonging the path to robust streaming profitability. This reinforces the need for patience, as investors should now place greater emphasis on viewership trends alongside profitability metrics when assessing Disney's streaming progress.