Disney+ continues to lead the pack of new streaming services, reaching 94.9 million subscribers in the quarter ending December 31, but average revenue per user plunged 28% from year-earlier levels.
The subscriber growth was at the high end of analysts’ estimates. ESPN+ is now at 12.1 million subscribers, nearly double the amount of a year ago, and Hulu rose 30% to 39.4 million subscribers across its on-demand service and the Hulu + Live TV bundle. With 4 million subscribers to the live bundle, Hulu is now the fifth-largest pay-TV operator in the U.S.
The numbers were highlighted in the company’s fiscal first quarter earnings report. Overall results exceeded Wall Street analysts’ expectations despite taking a $2.6 billion hit to its theme parks business in the quarter due to the effects of Covid-19. Streaming has become the north star for Disney, and investors are rewarding its growth potential and overlooking the financial wreckage of 2020, but nearly every other part of its business has been badly disrupted by the pandemic.
Direct-to-consumer revenue in the quarter shot up 73% to $3.5 billion, with operating losses falling to $466 million from $1.1 billion a year ago. Management has forecast break-even on the streaming business by fiscal 2024, but trends suggest it could enter the black even sooner.
Average revenue per user, a key metric in the streaming business, has long been a concern internally and among some investors — thus the planned price increases for Disney+ next month. In the last quarter of 2019, when Disney+ launched, its ARPU was $5.56. The inclusion of the service as a no- or low-cost option for existing Hotstar subscribers has turbocharged its global growth but also put limits on revenue, at least for the near term.
Disney got control of Hotstar in the $71.3 billion Fox deal and has positioned the South Asian media powerhouse as a key to its growth plans. The Disney Plus Hotstar bundle includes the Disney+ offering for less than two dollars a month in one popular subscription plan, and indications are that up to one-third of the 94.9 million Disney+ subscribers come in through Hotstar.
Hulu was at the opposite end of the ARPU spectrum, reaching $75.11 for the live TV bundle plus the on-demand service, up 26%. ESPN+ stayed relatively flat compared with a year ago at $4.48.
At its investor day in December, Disney announced it had reached 86.8 million subscribers to Disney+. The last quarter of 2020 included the release of Pixar movie Soul on Christmas Day, which third-party numbers have indicated was widely seen. Disney has released virtually no viewership details about content on Disney+, including feature films shifted there due to the coronavirus pandemic. Soul has played in several international territories, bringing in more than $100 million and faring especially well in China.
On the international front, Indian Premiere League cricket matches ended last November on Disney Plus Hotstar, and Verizon’s bundling deal with Disney+ ended after its initial launch in November 2019. Even though newer Disney promotions have been announced, Verizon said about one-third of customers who signed up for the original Disney bundle did not renew. Despite those headwinds and questions about coming price hikes, Disney significantly boosted its internal projections for its streaming business at the investor day. The company now expects Disney+ to be at 230 million to 260 million subscribers by 2024 (more than triple its guidance in 2019), with 300 million to 350 million subscribers across all three of its major services.
Netflix continues to set the pace for all streamers, with 203.7 million global subscribers as of the end of 2020.
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