Axios Pro: Media Deals
May 12, 2022
Axios Pro Exclusive Content

Good morning, Media Deals readers!

🦖 Quote of the day: "I'm buying the dinosaur because the dinosaur comes with cash flow and the dinosaur is gonna lay nice little dinosaur eggs called digital ad businesses," Chicken Soup for the Soul Entertainment CEO William Rouhana Jr. told Forbes of the Redbox acquisition.

1 big thing: 🤷 Disney's content conundrum

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, Tim writes.

Why it matters: As we wrote yesterday, 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 today.
  • 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.

Go deeper.

View archive