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The gap between Disney+ and Netflix continues to narrow, even as average revenue per subscriber dips.
Disney posted quarterly earnings that outperformed analysts’ expectations and showed continued strong growth in the increasingly competitive streaming market.
The media giant reported revenues of $17bn in the three months to 3 July, a 45pc increase year on year, and edging out market predictions of $16.8bn. Its diluted earnings per share were $0.80, soundly beating Wall Street’s expectations of $0.56.
“We ended the third quarter in a strong position, and are pleased with the company’s trajectory as we grow our businesses amidst the ongoing challenges of the pandemic,” said Disney CEO Bob Chapek.
“Our direct-to-consumer business is performing very well, with a total of nearly 174m subscriptions across Disney+, ESPN+ and Hulu at the end of the quarter, and a host of new content coming to the platforms.”
Disney+, the streaming service that launched in Ireland last year, now has 116m subscribers worldwide. This represents a 102pc increase year on year and beat expectations of about 114.5m, but the average monthly revenue per subscriber took a 10pc hit to land at $4.16.
These numbers are shaped by the company reporting its Indian service Hotstar as part of its Disney+ numbers. Hotstar continues to experience rapid growth in Asia, as the flagship service may be stagnating in North America. However Hotstar, including combined Hotstar and Disney+ bundles, is at a lower price point than the streaming service in other markets, so this growth comes at a cost of average user revenue.
In the earnings call, Chapek noted that both services are in the process of rolling out to new markets. During the reporting period, the combined Hotstar package launched in Malaysia and Thailand, and Disney+ partially launched in Japan.
Launches in Hong Kong, Taiwan and South Korea are planed for November, but an eastern Europe launch was pushed from late 2021 to summer 2022. Chapek also unequivocally said that streaming is Disney’s “top priority” currently.
The Disney+ subscriber total represents an add of 12.4m since the previous quarter, during a time when rival Netflix added just 1.5m. Though Disney took much longer to enter the streaming market, launching its service in November 2019, it’s rapidly closing the gap.
Netflix continues to outspend on producing new original content for streaming, with a budget of $17bn for 2021 compared to just $8bn to 9bn for Disney+. But Disney can also rely on its extensive back catalogue of media and the numerous popular franchises it owns, such as Star Wars and Marvel.
Additionally, Disney owns Hulu and ESPN+ alongside its flagship streaming service. In the quarter ending 3 July, Hulu hit 42.8m subscribers, a 21pc year-on-year increase, and ESPN+ reached 14.9m, a 75pc jump.
Though these compete much less directly with the likes of Netflix, they provide important revenue – Hulu users pay an average of $13.15 per month or $84.09 for those with live TV packages.
Chapek noted Disney’s strengths on the earnings call, highlighting “our powerhouse brands and the vast array of direct consumer touchpoints we have across our businesses”.
“This synergy allows us to increase consumer awareness and further increase engagement with our streaming service,” he added.
It remains to be seen how more novel content strategies like Netflix’s move into gaming will affect the streaming market as time goes on.
