Slower growth for Disney+ amidst maturing SVOD space

November 25, 2021

Young Latino family enjoying television indoors together

Greg Sigel

SVP – North America

While the erstwhile rapid growth of the Disney+ subscriber base appears to have plateaued, for now, a conveyor belt of new, unique content over the next twelve months coupled with its expansion into additional Asian markets could help Disney+ quickly resume its earlier momentum.

Disney+ added just 2.1m subscribers in the financial quarter ending 2nd October 2021, up 60% year on year to reach 118.1m according to Statista calculations, a figure up just 2% over the prior quarter (116m) though. The platform has expanded tremendously since its launch in the first quarter of 2020. Interestingly, Disney+Hotstar, acquired as part of the 20th Century Fox acquisition in 2019, accounts for 40 percent of the users. Disney will be shutting down Hotstar in the US in late 2022, and the content will be split across Hulu and ESPN+.

Disney+ now intends to entice new and existing viewers with an impressive lineup of new, unique content released to coincide with the second anniversary of its launch, dubbed “Disney+ Day,” on 12th November. That includes movies Shang-Chi and the Legend of the Ten Rings, Jungle Cruise with Dwayne Johnson and Emily Blunt, Home Sweet Home Alone, and an original series starring Michael Keaton (Dopestick) and a series of shorts featuring the ever-popular snowman Olaf from Frozen and the Simpsons.

More of the same is in the pipeline. The company estimates that the next year will see more than 340 local original titles in various stages of development and production across all of its direct-to-consumer (DTC) platforms, which also include ESPN+ (17.1m subscribers) and Hulu (43.8m). Disney+ also introduced some heavily discounted offers in November, allowing new and eligible returning subscribers to get their first-month subscription for just US$2 (rather than US$8) in a bid to sign up more customers.[i]

DTC delivers fastest Disney revenue growth

Along with Hulu and ESPN+, Disney+ contributed a third of the US$51bn of revenue generated by the Walt Disney company’s digital media and entertainment distribution division in FY21. Turnover from DTC assets increased 55% year on year to US$16.3bn in FY21, with Q421 revenue up 38% to US$4.6bn. By contrast, the media and entertainment division as a whole grew just 9% year on year to US$13.1bn in the same period.

However, the high cost of unique content production continues to exert significant pressure on DTC profits. Operating income losses improved from US$2.9bn in FY20 to US$1.7bn in FY21, the fourth quarter went in the opposite direction, widening by 68% from a loss of US$374m to a deficit of US$630m. Disney+ average revenue per paid subscriber also shrank 9% from US$4.52 in Q420 to US$4.12 in Q421 due to a higher mix of Disney+ Hotstar subscribers. Its’ customers in India pay less for the service (around US$20 a year for the Premium version) than their counterparts in North America and other western markets, where the same tier costs between US$80 and US$120 after price increases introduced earlier in 2021.

Netflix comparison and competition

The deceleration in Disney+ subscriber growth during the fourth quarter coupled with Netflix’s September 2021 results led Digital TV Research to update its predictions that Disney + would overtake Netflix in subscriber numbers in 2027 – rather than 2025 as it previously forecast[ii]. But Disney executives still maintain the service is on track to reach between 230m and 260m paid subscribers globally by the end of the fiscal year 2024[iii].

Much of that growth will depend on replicating the previous success of the service in other parts of the world outside the Americas and Europe. Disney+ is currently available in over 60 countries and 20 languages, but its international presence is scheduled to more than double to 160 countries by the fiscal year 2023. Disney+ Day has already seen the service debut in South Korea and Taiwan on 12th November before extending to Hong Kong on 16th November, for example[iv].

As I had noted in my recent blog, Squid services up Netflix boost; Netflix has several aces up its sleeve, especially when it comes to producing localized content. But whatever the pace of their future expansion, SVOD services like Disney+ and Netflix remain critical components of the content bundles, and mobile network operators offer customers to attract them onto mobile subscription packages.

Research company Omdia estimates that the number of mobile subscription bundling deals involving SVOD subscriptions has expanded 28% since the end of 2019. While Netflix has the highest number of active live partnerships, Discovery+, Disney+, and Amazon Prime Video signed more new deals with carriers between October 2020 and March 2021 (read more in our CEO Jonathan Kriegel’s recent blog Telcos signing more video bundling partnerships than ever).

Downloads of the Disney+ app on both Android and Apple iOS smartphones regularly surge whenever new films or TV shows are released on the platform. The increasing consumer preference for viewing SVOD content on their smartphones, coupled with the low penetration of cards, remain two distinct characteristics of emerging markets. For a growing number of consumers, paying for subscriptions through direct carrier billing and other alternative payment methods is more convenient. And these payment methods will catalyze the next phase of growth for SVOD services going forward.

[i] This Disney Plus discount drops the price to just $1.99 / £1.99 – but it ends soon, Games Radar, 12th November 2021

[ii] Disney+ set to overtake Netflix as world’s biggest streamer by 2027, Digital TV Europe, 17th November 2021

[iii] How Disney+ and Netflix rivalry is moving beyond streaming, Mediatel News, 19th November 2021

[iv]  Disney Plus Goes Live in Korea and Taiwan, Variety, 12th November 2021

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