Disney (NYSE: DIS) unveiled its new Disney+ streaming service just last week, and it’s already making waves.
The streaming service will launch in November with over 100 recent movies and 400 classics, running the gamut from Marvel to Pixar to Lucasfilm and Disney Studios, as well as 7,500 television episodes, 25 original series, and 10 original movies developed exclusively for the platform.
Disney+ has been priced to undercut rival Netflix (NASDAQ: NFLX) at $6.99 per month, which will lose some popular content it currently licenses from Disney, including titles from the Star Wars and Avengers franchises.
While it’s not hard to see why Disney investors were thrilled by the announcement, they won’t be the only ones to see a benefit from the new service.
Disney announced that it has reached an agreement that will display the Disney+ option prominently on Roku (NASDAQ: ROKU) devices. That will give Roku a cut of the revenue generated by new subscribers it helps to attract to the service.
Needham analyst Laura Martin estimated that Roku gets between 20% and 30% of subscription revenue when one of its users downloads a streaming app. Disney is anticipating Disney+ will have between 20 million and 30 million subscribers in the U.S. by 2024.
According Martin, the deal could bring in as much as $135 million in additional revenue for Roku next year, and result in an extra $187 million per year in revenue for the company by 2024, adding as much as $1 billion to the company’s market cap.
To put that into perspective, Roku generated around $417 million in revenue last year. Thus, an additional $135 million in revenue would be an increase of 33%.
She also noted that Netflix currently pays the least for advertising on Roku’s platform, but the company’s new deal with Disney could force Netflix to pay up in order to keep up with the new service.
“We also project additional advertising revenue,” Martin said. “By 2024, we expect Disney to be spending $500 million marketing its Disney+ services, of which 20% could go to Roku, representing $100 million of incremental ad revenue upside in 2024.”
Roku has been on a roll recently. Even before the Disney+ announcement, the platform’s active accounts grew to 27 million, up 40% year-over-year, and with streaming hours on its platform up 69% to 7.3 billion. This resulted in revenue rising by 46%.
The company announced earlier this year that users would be able to subscribe to 25 additional premium services including Showtime, Epix, Starz, and HBO. With Disney+ in the mix, Roku could see a surge in customer adoption this year and next.
Martin reiterated her Buy rating on Roku and has a price target of $85 on the stock. That represents 50% upside from Thursday’s closing price.