There are apparently a lot of people who need their fix of Star Wars, Marvel superheroes, Disney movie classics, and sports – as the Mouse House’s platforms surpassed Netflix in July to become the top streaming service with 221.1 million subscriptions. However, it should be noted that those numbers are for Disney+ plus Hulu and ESPN+.
Netflix can rest easy… for now. The service had approximately 220.67 million paid subscribers worldwide (73 million of which are in the United States and Canada) at the end of the second quarter (Q2) of 2022, and thus still tops Disney+, which now has the Lion King’s share of the total Disney streaming customer base with 152.1 million subscribers. Moreover, whereas Disney is still seeing growth, Netflix has begun to lose customers.
Netflix, which began as a DVD rental-by-mail service, lost about 200,000 U.S. subscribers in the first quarter (Q1) of this year, marking the first drop in customers in more than a decade. It had attributed the losses to stronger competition in the market, along with password sharing.
Perfect Timing?
Much of Disney’s success has been credited to populating Disney+ with its “crown jewel” franchises from Star Wars and Marvel, and in just 16 months after its launch, the bargain-priced service hit 100 million subscribers – a feat that took Netflix a decade to accomplish. Of course, the pandemic – which began just months after Disney+’s launch – certainly played a role, as audiences stayed home and for anyone with children, Disney+ was a must-have.
Netflix may not have created streaming, and there were services that came earlier, but it refined the business model, paving the way for Amazon’s and Hulu’s success with marquee original programming. These companies helped usher in the “cord-cutting” era that could kill off traditional cable and satellite TV services.
Another consideration is that though Disney+ may have been a late arrival to the over-the-top (OTT) streaming world, it has content from one of the most successful Hollywood film and TV studios in history. Even without the pandemic might have been able to see success in the market.
Now even as Covid restrictions have been largely lifted, the company has continued to add subscribers – some 14.4 million new Disney+ accounts in just the past quarter. Series such as The Mandalorian and The Book of Boba Fett, which are rolled out weekly have also helped reduce “churn,” where streaming subscribers binge the show over a weekend and then proceed to cancel that service.
Ads Coming?
Despite the fact that Disney has a solid customer base, it actually generates only about 39 percent as much revenue per subscriber as Netflix. That explains why Disney will change up its business model slightly at the end of the year. In fact, it might seem hard to believe, but Disney plus actually failed to make a profit, losing over $1 Billion last quarter and more in previous quarters.
In its recent earnings call, the Mouse House announced that as of December 8, it will offer a version of Disney+ with ads that will cost $7.99 per month – the current price of the service – while an ad-free version, dubbed a “premium” plan will increase to $10.99 per month.
Hulu, which Disney acquired a majority stake in during 2019, already offers similar tiers, and customers will see a price increase beginning on October 10. The streaming service’s ad-support subscription will increase from $6.99 to $7.99 monthly, and the ad-free service will jump from $12.99 to $14.99. In addition, Hulu will no longer offer a yearly “premium” package, while its “basic (with ads)” subscription will be offered for $79.99 annually – saving users about $0.33 monthly.
Disney had previously announced that the ESPN+ streaming service will increase its prices from $6.99 each month and $69.99 annually to $9.99 each month and $99.99 annually. The new pricing is set to take effect on August 23.
Attracting Eyeballs
All of the streaming services increasingly spend millions, even billions of dollars, on creating fresh content to attract and then keep subscribers. So far for Disney, it seems to be paying off.
“The streaming landscape is changing at a fast pace and there remain surprises. Disney is a perfect example,” said Susan Schreiner, senior editor/analyst at C4 Trends.
“It’s proving that it’s still possible to win subscribers and surpass analyst expectations given that its flagship streaming service, Disney+ added 14.4 million new subscribers last quarter – more than 10 million more than analysts expected,” she told 19FortyFive. “That brings its total to 152 million plus Hulu and ESPN+ subscribers brings Disney’s total to 22.1 million across its streaming platforms. It’s interesting that almost two-thirds of Disney+’s 14.4 million were in India and Southeast Asia.”
The question, in light of today’s incredible battle for consumer attention, is how will Disney+ leverage its brand to build businesses that generate longer-term growth in subscribers and revenue?
“Today’s media conglomerates like Disney have many paths yet open,” Schreiner continued. “One path for Disney+ might be continuing to leverage its brand through international expansion, and this might require acquiring other alternative distribution platforms in key markets.”
An ad model is another option.
“It will use that occasion to significantly raise the price of its existing ad-free subscription tier,” Schreiner noted. “Subscribers will have to pay $10.99 per month to watch Disney+ without ads going forward, with the ad-supported tier costing $7.99 per month. Considering that Disney+ is pursuing an ad-supported model, it might offer tiered programs. Is there the possibility that Disney+ will offer more ‘commodity-oriented’ pricing? Perhaps, it might consider creating a cheaper platform with more narrowly focused programming.”
The final question is whether other services might follow suit. While we won’t likely see ads on HBO’s cable channel, it is possible as HBO will be rolled into Discovery’s service next year that some HBO Max content could feature ads.
“Opening the door to ad-supported tiers introduces new opportunities and challenges for brands,” said Schreiner. “It also might pave the way for acquisitions and/or partnerships related to ad-tech or it might opt to acquire apps or platforms that enable greater interactivity features.”
A Senior Editor for 1945, Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers and websites. He regularly writes about military hardware, firearms history, cybersecurity and international affairs. Peter is also a Contributing Writer for Forbes. You can follow him on Twitter: @PeterSuciu.
