After Disney’s Q2 earnings, it’s time for another Disney Subscriber Dive.
Disney+ Core subscribers grew modestly compared to the prior quarter. The total was 600,000 new subscribers in Q2 2023. However, Disney+ Hotstar decreased by 4.6 million subscribers. Man, they must really love cricket! It’s never a good thing to lose subs but Disney makes a meager 59 cents per subscriber off of Disney+ Hotstar. That’s a far cry from the ARPU (average revenue per user) that Disney+ Core subs bring in at $6.47. So the glamorous headline of Disney+ losing 4.6 million, isn’t as exciting in reality when you realize those subs don’t amount to much.
The Disney+ Core ARPU will continue to rise with the ad tier, plus the inevitable price hikes. Although I suspect Disney CEO Bob Iger will raise the price of Disney+ little by little. Unlike his successor-predecessor Bob Chapek who just immediately jacked the price of premium up three dollars. Iger understands optics, even with streaming.
Now let’s check in on Hulu. There was a slight subscriber increase but its ARPU decreased due to more multi-product offerings like the Disney Bundle. Hulu’s ARPU is $11.73, that’s $5.26 more than Disney+ Core’s ARPU. Someday I bet Disney+ will get to that level of ARPU. I think Hulu being folded into Disney+ is inevitable as well. What’s the overlap in subscribers between Hulu and Disney+? Hulu has 48 million subscribers and how many of them also subscribe to Disney+? Hulu being merged into Disney+ would also give Disney a convenient excuse to jack up the price of the combined streamer.
ESPN+ has had steady growth. The sports-centric streamer is now at 25 million subscribers. That is small but considering that this is a scaled-down version of ESPN I’m quite impressed. However, ESPN+ may not be forever. It may become time to drop the plus (it’s cleaner). Disney is working on a plan to stream ESPN’s main channel. The project has the code name “Flagship.” ESPN pivoting from cable to streaming will be a massive move. It is crucial that Disney gets it right, but a standalone ESPN streamer with all the sports rights will be expensive — like $35 to $45 a month expensive. I also wouldn’t rule out — I am just speculating here — the possibility that Disney shifts ESPN’s main channel to Disney+. Instead of forcing people to subscribe to a different streaming service, Disney could potentially use ESPN as a way to boost the service and make it more of a destination streamer with live programming (more on this idea in a future article).
Overall, Iger and McCarthy’s cost-cutting in streaming is working. Disney’s DTC operating loss was only $700M in Q2 2023. They improved losses by $400 million from the previous quarter, and by $200 million from the prior-year quarter. Disney’s DTC operating loss has been a point of contention for shareholders. Remember that Q4 2022 was the infamous quarter where the DTC operating loss hit $1.5 billion, and the Board went after Chapek.
In a cost-saving move, Disney is writing off content that underperformed. Disney is taking an impairment charge to the tune of $1.5 billion to $1.8 billion. I wrote about it here and in my newsletter below.
Another aspect I wanted to dive into in this Disney Subscriber Dive is Disney+’s viewership. Specifically, I want to pinpoint The Mandalorian. Despite facing criticism, The Mandalorian continues to dominate viewership on Disney+. According to SambaTV, 1.6 million U.S. households watched the premiere of The Mandalorian season three. 662,000 watched the finale on its premiere day. 1.4 million U.S. households watched the season three finale within its first five days. The Mandalorian was also number four on the Nielsen rankings for the week of April 10–16. It’s still a draw for Disney+.
Another intriguing streaming note is that the demand for Star Wars: Rebels is rising ahead of Ahsoka, according to Parrot Analytics. I’d expect Rebels viewership to increase ahead of Ahsoka’s August premiere. Disney+ could do a better job of highlighting important titles from its library.
Elsewhere on Disney+, 726,000 U.S. households watched Peter Pan & Wendy over its first three days according to SambaTV. That’s pretty solid for an original Disney+ film. Still a bit shocking that Disney didn’t save the Peter Pan live-action remake for theaters.
Marvel films also remain draws as Ant-Man and the Wasp: Quantumania netted 996,000 U.S. households over its five days according to SambaTV. Despite Quantumania’s frosty critical reception and box office performance, the film clearly piqued curiosity from the Disney+ subscriber base. Disney probably doesn’t have the data but I would love how many of the 996,000 U.S. households were watching Quantumania for the first time and how many saw it in theaters and just wanted to rewatch. I feel like those data points would paint a clearer picture if a section of the audience is now just waiting for everything to release on Disney+.
As Disney pushes its streaming services towards profitability. They are now pushing subscribers to sign up for the ad tier. The good news for Disney is that most subscribers are now opting for ads according to Antenna.
Until next time, this has been a Disney Subscriber Dive.
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Zach Perilstein is the Editor-in-Chief of the Boardwalk Times
