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Disney's streaming growth hampered by declining subscriber revenue

Tim Baysinger
May 12, 2022
Data: Company earnings reports; Chart: Axios Visuals

Disney's streaming ambitions are being hindered by a decline in the amount of money it makes per subscriber.

Why it matters: As we wrote Wednesday, the economics of streaming have come under a microscope amid Netflix's struggles.

  • Disney reported stronger than expected growth in its streaming service during Q2.
  • Despite those gains, Disney missed on revenue and earnings-per-share projections, which dragged the stock down in after-hours trading. The stock was trading around $103, down more than 2%, at 10:20am Thursday.
  • Another reason for the sagging stock? Some jitters around what CFO Christine McCarthy forecast on the call.

By the numbers: Despite its impressive 137 million subscriber total, Disney+ only makes $4.35 off of each customer.

  • Disney+ is one of the cheaper options out there and is also offered to U.S. customers via its bundle with Hulu and ESPN+. Additionally, Disney+ integrated Hotstar subscribers in India, where it costs significantly less.

India issue: Disney's average revenue per user (ARPU) goes up to $6.33 when you take out Disney+ Hotstar customers, where the ARPU is 76 cents. Roughly one-third of Disney+'s subscriber base (50.1 million) comes from Hotstar.

The big picture: Streaming remains an expensive proposition. Disney's losses in its direct-to-consumer segment ballooned to $887 million, more than triple from the year-ago quarter.

  • Hulu is far and away the strongest streaming revenue driver with an ARPU of $12.77 — that figure includes an advertiser-supported tier.

What's next: One way Disney is seeking to boost Disney+'s revenue is by adding an advertiser-supported tier, which should come by the end of this year in the U.S. and in international markets starting next year.

  • Disney CEO Bob Chapek expressed confidence in building out Disney+'s advertising operation, given the company's experience with ESPN+ and Hulu's advertising tiers.
  • No update on what pricing might look like, though similar ad-supported options cost between $4-$6.

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