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Disney+ Is Off to a Strong Start, But There's One Caveat

Disney+ outpaced other streaming video apps in initial engagement, according to Apptopia, but dropped off after the first few days, according to new research.
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Disney+ is seeing strong results in terms of downloads and initial usage, but engagement has tended to tail off after that first spike, according to new research.

The Disney+ app is outpacing other competitors in terms of total downloads since its launch in early November, app intelligence firm Apptopia revealed in a recent analysis. Shares of Disney  (DIS) - Get The Walt Disney Company Report were up 0.53% to $146.85 on Wednesday.

Disney+ has been downloaded 22 million times in the four weeks since its official launch, according to Apptopia, which tracks app downloads and engagement metrics. That made it the top-ranked app on both the App Store and Google Play over that time frame, with Disney+ beating out both Netflix and Amazon Prime Video in terms of new installs in its first month. 

In the past week, Apptopia estimates that Disney+ had 9.5 million daily active users in the past week, 84% of which are in the U.S. The Disney+ app is live in the U.S, Canada, Australia, New Zealand and the Netherlands, and will roll out in several other European countries in March 2020.

Looking at hours spent in the past month, however, Disney+ is still far behind Netflix. Between Nov. 12 and Dec. 11, Apptopia's data suggests that users have spent close to 1 billion total hours in the app, while Disney+ users have spent roughly 200 million hours in its app. Disney+ was ahead of Amazon Prime Video, which saw roughly 100 million hours spent in the app. 

Apptopia’s estimates seem to square with Disney’s own reporting on the strength of the Disney+ launch. The company said that it saw 10 million sign-ups within the first day of its U.S. launch, likely owing in part to an aggressive marketing and sales blitz that offered a free year to Verizon wireless customers, among other promotional deals.

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Early Disney+ users appear more engaged compared to users of other streaming apps. In the first month, Disney+ has 5.8% longer average session times on a per user basis than Netflix  (NFLX) - Get Netflix Inc. Report, and 7.8% longer than Amazon  (AMZN) - Get Inc. Report Prime Video, Apptopia said.

However, there's a caveat: Although the number of users who opened the Disney+ app was higher than industry benchmarks for the first few days after an initial install (35.2% versus 28% average for top apps), the number of users drops off below other top apps and other entertainment apps after about a week.

"Our hypothesis as to why this drops is that Disney+ lacks lots of original content. Most of its content is shows and movies people have already seen," Apptopia wrote. 

To keep up viewer interest -- and to potentially grab market share from competitors on a sustained basis -- that could mean the pressure is on Disney to crank out more compelling original content, such as its buzzy flagship show The Mandalorian, into next year and beyond. 

Disney has set a target of accumulating between 60 million and 90 million global DIsney+ subscribers by 2024. Although Netflix is far and away the market leader in streaming, with roughly 160 million global subscribers, some analysts believe that Disney+ could dislodge some of Netflix's subscriber base. 

Wedbush Securities estimated that Disney+ and Apple TV+ together could disrupt 10% of Netflix's subscriber base. Earlier this week, Needham's Laura Martin cautioned that rising competition could mean a loss of up to 4 million of Netflix's roughly 60 million U.S.subscribers in 2020.  

Disney shares are up 34% year to date.