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Disney+ subscriber growth is slowing like Netflix — with one worrisome difference

A performer dressed as Mickey Mouse entertains guests during the reopening of the Disneyland theme park in Anaheim, California, U.S., on Friday, April 30, 2021.

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Disney seems to have picked up a bit of Netflix-itis.

Just as Netflix added fewer than 4 million global subscribers in the first quarter, disappointing investors, Disney announced it now has 103.6 million Disney+ subscribers, far less than the 109 million analysts estimated. Disney shares slumped about 4 percent in after-hours trading.

Superficially, both Disney and Netflix can explain away the disappointing growth by citing the surge in viewers earlier in the pandemic. The logic is simple: Far more people signed up for Disney+ and Netflix in the first six months of the pandemic than the companies had counted on. Given the surge, it’s only natural that growth would pull back to more “normal” levels as the pandemic winds down.

Further, both Disney and Netflix can safely assume that subscriber growth will accelerate in the second half of the year as show production begins again in earnest and high-profile content — such as “Loki” and “Luca” for Disney — come to streaming video later this year.

But there’s one significant difference between the two companies where Disney falls far short: Average revenue per user.

Disney+’s average revenue per user, excluding India’s Hotstar, was $5.61 per month. Netflix’s ARPU last quarter in the U.S. and Canada was $14.25 per month — up 9% from a year ago.

If you’re going to have slumping growth, you want your customers paying as much as possible. Disney’s Hulu subscription video on-demand service has higher ARPU — $12.08 per month — but its growth was negligible, up just 2 cents per month from a year ago. Hulu has 37.8 million subscribers — which rises to 41.6 million including those that also purchase live TV.

None of this particularly concerning yet for Disney Chief Executive Bob Chapek, who noted “every single market has exceeded expectations” in terms of global subscriber additions. He also pointed out that Disney is still expanding to new countries internationally, with Malaysia and Thailand coming in June.

But Disney+ has vaulted into the streaming big leagues. In 2020, the logical comparison for Disney+ was HBO Max, Peacock, and other new media streaming services.

Given Disney’s success, this year’s comparison will be Netflix. Disney has already projected 230 million to 260 million subscribers by 2024. That’s Netflix-land (Netflix has about 208 million customers).

Netflix has been able to raise prices gradually over the years without stopping global growth. Disney may be able to do the same — but the stark differences in ARPU between the two companies illustrate the long road ahead.

Disclosure: Peacock is the video streaming service from NBCUniversal, the parent company of CNBC.

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