Disney’s Streaming Services Surpass Netflix’s Total Subscriptions but Generates Lower Per-Sub Revenue

Disney’s Streaming Services Surpass Netflix’s Total Subscriptions but Generates Lower Per-Sub Revenue

Walt Disney’s streaming services have surpassed Netflix in total paid subscriptions worldwide for this year’s second quarter. Disney released its quarterly results yesterday, which show that the combined number of subscribers from all of its streaming services, including Disney+, Disney+ Hotstar, Hulu and ESPN+, has reached 221.1 million, Variety is reporting.

Disney+ currently has 152 million subscribers, ESPN+ has 22.8 million subscribers and Hulu, including Live TV, has 46.2 million subscribers. The combined number of subscribers from all of Disney’s streaming services puts the company just ahead of Netflix, which ended Q2 with 220.7 million total paid subscribers.

Netflix suffered an unexpected loss of 200,000 subscribers in this year’s first quarter, and then lost 970,000 more subscribers during the subsequent second quarter. The numbers proved to the biggest subscriber loss in the company’s history.

But the value of those subscriber bases is much different for both companies. Domestically, Disney+ generated about 39% as much revenue per subscriber as Netflix for the second quarter this year. In the finance world, that revenue is referred to as ARPU (average revenue per user).

Internationally, Disney+ Hotstar, which is available in India and other Southeast Asian countries, represents 38% of Disney+’s overall customer base. The company had an ARPU of $1.20 per month for the year’s second quarter, which ended on July 2, while Netflix had an ARPU of $8.83 per month for the Asia Pacific region.

With the release of the information about both companies’ revenue, Netflix has expressed its objection to the way Disney tallies its streaming numbers. For each household that purchases the Disney Bundle, which includes Disney+, Hulu and ESPN+, each of the three services are considered to be a separate subscription.

When Disney+ first launched in November 2019, it rapidly amassed market share by pricing the streamer at $6.99 per month. That price was nearly half of Netflix’s standard plan at the time. But that low entry point means Disney’s main streamer makes less money than Netflix, which has historically always had the highest number of subscribers for streaming services.

For the three months that ended July 2, Disney+ domestic ARPU, which includes the U.S. and Canada, was $6.27 per month, which marks a 5% decline from the previous year. That’s compared with Netflix’s ARPU of $15.95 per month in the U.S./Canada region for the second quarter, which increased 10% due to price increases.

As a result, Disney+ is now trying to raise its profitability profile, as U.S. streaming subscriber growth has slowed for Disney. In the U.S. and Canada, Disney+ only garnered 100,000 new paid subs in the recent quarter.

Along with its earnings release, Disney announced a 38% increase for its premium no-ads version of Disney+, which will raise the price to $10.99 per month, beginning on December 8. That same day, the streaming service will also introduce Disney+ Basic, an advertising-supported tier that will be available at the previous $7.99 per month price.

The combination of the price increase and the introduction of the ad-supported Disney+ Basic tier is designed to raise Disney+’s ARPU.

Hulu also is set to increase its subscription prices during this year’s fourth quarter. On October 10, the price of Hulu’s ad-supported tier will increase from $6.99 to $7.99 per month. Meanwhile, the ad-free tier will be raised from $12.99 to $14.99 per month.

ESPN+ ARPU rose 2%, to $4.55 per month, during this year’s second quarter. The streaming service’s rates will increase from $6.99 to $9.99 per month during the upcoming fourth quarter.

Disney expects Disney+ to reach profitability in fiscal year 2024. In the most recent quarter, the media conglomerate’s streaming losses increased. Disney’s direct-to-consumer revenue was $5.06 billion for the quarter, which was below Wall Street expectations of $5.2 billion.

Netflix, meanwhile, posted revenue of $7.97 billion and net income of $1.44 billion during the second quarter. The company is also in the process of rolling out a ad-supported streaming tier, in an effort to maintain its profitability.

While Disney expects core Disney+ growth to continue on its expected trajectory through 2024, the company also cut projections for Disney+ Hotstar during that time period, due to its loss of Indian Premiere League cricket rights. With the warning about a slowdown in India, Disney lowered the subscriber target for Disney+ over to 215 million-245 million global subscribers by the end of its fiscal year 2024, down from its previous target of 230 million-260 million.

Check out more of Karen Benardello’s articles.

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