Disney’s revenue rose 5% to $24.7 billion last quarter, up from $23.5 billion this time last year. But subscriber growth at The Mouse House is much less straightforward.
Hulu gained 1.6 million subscribers last quarter, while the number of subs for Disney+ alone dipped by 700,000. These numbers underscore the value of TV bundles, which helps networks like Disney attract and keep a wider variety of subscribers.
Even so, Disney’s gains are small potatoes compared to Netflix, one of its staunchest competitors, which gained 19 million subscribers in the last quarter alone.
But despite the blaring subscriber gap between Disney and Netflix, the former says it’s all part of a grand plan that’s playing out as expected.
“We are very pleased with our sub growth,” CEO Bob Iger told investors during the company’s earnings call on Wednesday, noting that recent price hikes contributed to expected churn.
This year, Iger said, sports and new content, more bundle offers and anti-password sharing tactics will boost Disney’s numbers. “We’re very well-positioned to grow both subs and profits over the next few years.”
Disney pines for subscribers
Disney is one of a handful of networks that is copying Netflix’s anti-password sharing tactics.
Over time, kicking moochers off of shared accounts increases the number of new account sign-ups – especially for ad-supported accounts, which are more affordable. Moochers that originally wouldn’t pay for their own accounts are more likely to choose the cheaper tier when they do finally become members themselves.
Still, it takes more than punitive or corrective measures to grow subs. Streamers also have to make their offerings more attractive to consumers compared to the competition. “Growing engagement is critical to lowering churn,” Iger said.
Disney, for example, is trying to increase engagement and watch time on its platform by making its home screen more interesting and attention-grabbing. Although Iger didn’t share details, it’s likely Disney will incorporate more videos and trailers rather than rotating hero images. The Disney+ app home screen is “elegant-looking but fairly static in nature,” Iger said. But “the more dynamic it is, the more people are drawn to it and [less likely to] close the app and go elsewhere.”
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“We have already made some progress” on the home screen experience, Iger said, but expect “significant improvement” by the end of this year.
Betting on subscription bundles
Sports and bundles are Disney’s other tactics for wooing subscribers this year.
Last year, ESPN helped Disney’s combined streaming portfolio turn a profit for the first time. ESPN’s ad revenue jumped 15% just last quarter.
Disney has placed ESPN at the center of its streaming pans due to its growth potential. Later this year, Disney plans to launch a standalone ESPN+ streaming app.
Disney is also combining Hulu + Live TV with a similar Fubo offering as a separate streaming service.
Disney’s agreement with Hulu came at the heels of Venu Sports – the sports joint venture between Disney, Fox and Warner Bros. Discovery – fell apart. “The emergence of skinnier bundles [made] Venu look redundant to us,” Iger told investors. (Oddly enough, the three networks behind Venu agreed to collectively pay Fubo $220 million to settle the latter’s antitrust suit filed in February last year.)
It’s unclear which skinny bundles Iger is referring to, exactly, but there are lots of sports-focused TV bundles cropping up. DirecTV, for example, launched a skinny bundle called MySports in January.
Having ESPN available to watch in multiple locations, including a standalone app, may cause confusion for consumers. But it’s critical that consumers have more choices, Iger said. Those who subscribe to the ESPN+ app coming later this year will also be able to access ESPN+ through the Disney+ app.
“The goal,” Iger said, “is to make ESPN as accessible as possible.”
