Disney has just overtaken Netflix with its strong subscriber growth and aggressive international push. This is more evidence that we are entering a new era of streaming wars.


  • Disney reported a solid second quarter of 137.7 million with an additional 7.9 million Disney+ subscribers.
  • Disney’s growth contrasts with Netflix’s recent subscriber loss and embarrassing forecasts.
  • It appears that Disney has a US streaming runway, as CEO Bob Chapek points to a la carte ESPN streamer.

The better-than-expected Disney+ subscriber growth, the upcoming ad-supported Disney+ tier, and chatter about a full-fledged ESPN D2C platform are just some of the generally optimistic pictures of the Walt Disney Company being the largest company.


streaming

competitor,


Netflix

It remains on the hind feet.

After Netflix’s horrendous, terrifying, bad, and very bad quarter (which lost 200,000 subscribers and is expected to drop another 2 million subscribers this spring), not to mention even greater turmoil in the stock market, Disney 137.7 million Disney+ subscribers added 7.9 million. Disney stock fell on CFO Christine McCarthy’s warning of a slowing growth in the second half of 2022, but Chapek emphasized the company’s long-term goals of 230-260 million Disney+ subscribers and service profitability by 2024.

The results give Chapek some respite from a series of negative headlines about the company’s deal with Florida, as well as a validation of a late 2020 restructuring that frustrated some executives who lost control of the income statement. (The CEO whose contract expires in February next year has not yet renewed his contract at the board of directors.)

Disney entered the streaming war a few years later than Netflix, but in 30 months, Disney+, ESPN+ and


Hulu

With 205 million subscribers, it is behind Netflix’s 221 million. However, Disney said last quarter that its US ARPU was $6.32, which is still behind its top competitor in average revenue per user, compared to Netflix’s about $14.91.

While some worry that the golden age of adventurous and creative will come to an end as Netflix pursues more broadcast network-style plans, Disney+ is only just beginning to expand the brand beyond family- and kid-focused programming. As Chapek noted on Wednesday, nearly half of Disney+ subscribers are childless.

$32 billion content budget and 500 global title pipelines

“We are selectively enhancing Disney+ with generic entertainment titles designed to attract specific audiences to join and deepen engagement with those groups,” Disney CEO Bob Chapek said in a call on Wednesday. “We can reach these demographics not only by creating original titles, but especially by moving resources around the content ecosystem as consumer behavior continues to evolve.”

Simply put, this means adding original shows and movies, and transitioning shows from House of Mouse’s broadcast network and streaming platform to Disney+. The most famous ABC staple “Dancing With Stars” is heading to Disney+ this fall.

Although the company cut its content budget this year from its initial guidance of $33 billion to $32 billion, it still marks a significant increase over the previous year as it continues to focus on strengthening its film, show and live event pipeline. (A third of the budget is dedicated to sports rights.)

And for the first time, Disney CFO Christine McCarthy revealed the conglomerate’s intentions to offer more than 500 titles outside the US. Middle East, Africa.

In some ways, the plans laid out by Disney executives sounded similar to a Netflix blueprint a few years ago. Billions of dollars in content spending, hundreds of local language titles to get global attention, more programming (and a wider range of genres and themes) will ultimately prove profitable.

Regarding the cost of content, Chapek said in the currency, “it’s clearly a balancing act.” “But we believe great content will drive our submarines. Then these sub-content will drive our profitability at scale. So we don’t necessarily see them as contradictory. placed.”

Still, streaming is an expensive business. Despite a 23% increase in DTC revenue, Disney’s direct-to-consumer operating loss expanded from $600 million to $900 million during the quarter. The company attributed these losses in part to higher programming costs on both Disney+ and ESPN+.

‘Offer ESPN DTC’ and cheaper ad-supported Disney+ tier plans

Netflix is ​​approaching saturation point in North America, but Disney still has a lot of runways and feels like it has more than one way to pursue streaming growth unlike its rivals.

As the number of paid ESPN cable subscribers continues to dwindle, Chapek is surprisingly direct to an analyst’s question about whether the company will consider converting ESPN’s linear network to a full-fledged a la carte streaming service.

Chapek noted that linear broadcast and cable networks remain “huge cash generators” for Disney, but hesitation about the idea stems from “cash flow conditions,” but “our potential for a more aggressive entry into DTC.” I’m very conscious of my abilities, the realm of ESPN.”

“We know that when the good time comes for our shareholders, we can fully enter the ESPN DTC giving you the way you described, and we fully believe that there is a business model for us there. It will allow you to recover,” he said. “It will affect the immediate cash flow we get from our legacy linear network.”

He didn’t elaborate on when such a product will launch, how much it will cost, or the path to profitability, but Chapek is an ESPN streamer superfans who really love the sport.”

The outward enthusiasm contrasts with earlier Disney claims from former CEO Bob Iger that sports streamer ESPN+, launched in 2018, would only be offered as a supplement, not a replacement, to the flagship sports cable network.

And Chapek is planned for an ad-supported tier on Disney+, which will launch in the US later this year and worldwide in early 2023. Unlike Netflix, which has to segment its tech infrastructure to accommodate advertising, Disney already has this in place. Thanks to ESPN+ and Hulu.

“We feel that our advertising capabilities have prepared this tier already quite operationally,” said the Chief Executive Officer. “So there’s nothing we need to acquire, or, frankly, develop something new, because we continue to invest in technology over time to automate much of this process more and more.”

The contrast between the two companies’ most recently reported quarters could mark a major shift in the market, as Netflix’s longstanding dominance as an early mover may soon have to share a vast well of IP and resources with the House of Mouse. An ongoing streaming war and a battle that hasn’t come yet.

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