Disney’s Subscriber Losses Widened, but Stayed Ahead of Netflix & Financials Improved

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  • NFLX.us

Subscriber Loss

The Walt Disney Company reported on Wednesday overall solid results for Q2 FY2023 (period ending April 1) [1], with the streaming business being in the spotlight. The flagship service, Disney+, relinquished 4 million members - many more compared to previous quarters. The biggest contributor was again India (-4.6 million users), where it had lost the streaming rights to the important cricket matches around a year ago. [2]

However, Hulu and the sports-oriented ESPN+ added 600,000 members together. All three combined, lost 3.4 million subscribers, now having 231.3 users as of April 1. This was a much bigger contraction compared to that of the previous quarter, but still managed to stay ahead of arch rival Netflix and its 230.75 million subscribers. [3]

Strong Financials

Despite the sizable contraction of the user base, the financials of the streaming business were actually better in the reported quarter. Losses of the Direct-to-Consumer business narrowed significantly, due to "improved results at Disney+ and ESPN+", with the Operating Loss of $659 constituting improvements of 26% y/y and 37% q/q.

Revenues of $5.514 billion marked and increase on both yearly and quarterly basis. More to it, Domestic (U.S. and Canada) Disney+ Monthly Average Revenue per Paid Subscriber (commonly referred to as ARPU) increased 20% over the previous quarter, to $7.14, "due to an increase in average retail pricing".

Increased Competition

Disney is an entertainment powerhouse with decades worth of content, which includes two of Hollywood's most important franchises – Star Wars and the Marvel Cinematic Universe (MCU). With hit TV shows directly on the streaming platform and movies making their way into it, it creates a compelling offer. More to it, during yesterday's earnings call, CEO Bob Iger said that Hulu will soon be incorporated into Disney+ domestically, into an one-app solution. [4]

Other than Netflix that created the streaming market and remains a dominant player, legacy entertainment companies and tech giants alike push on the direct-to-consumer front, creating increasing competition.

Paramount+ of Paramount Global (PARA.us) added 4.1 million subscribers in the first quarter, reaching a record of 60 million subscribers, helped by the success of Top Gun: Maverick [5]. WarnerBros.Discovery (WBD.us) DTC userbase also increased, to 97.6 million, with HBO's Last of Us becoming its most viewed show in both Europe and Latin America. [6]

Tech juggernauts such as Apple, have managed to establish themselves in a short period of time with widely popular and critically acclaimed content. AppleTV became the first streaming platform to win the best Picture Oscar last year with CODA [7], while comedy series Ted Lasso has won multiple Emmys. [8]

Content Normalisation

Streaming viewership in the US has surpassed cable and broadcast for sometime now according to Nielsen [9] partly helped by the turn towards direct-to-consumer services during the pandemic. The industry however has faced significant headwinds as the world has moved away from lockdown, from the higher cost of living that diminishes disposable income and the saturation from the many offerings.

Disney+ launched back in late-2019 and has seen meteoric rise, with impressive content. Up until recently, the firm largely tried to offer everything for everyone, as the go-to way to gain market share and establish itself as strong player. But in the current adverse environment of high inflation and interest rates that squeeze margin, it seems to be taking a different approach.

A few months back, CEO Bob Iger announced a cost cutting plan, that is expected to affect content creation and the streaming platforms as a result. He alluded to that yesterday, saying that "it's critical we rationalize the volume of content". CFO Christine MacCarthy added that "we intend to produce lower volumes of content" [4]. So instead of producing as many shows as possible to cater to every need, it will likely focus on fewer option, which will need to be compelling ion order to work.

Ad-Supported Tier & Pricing

Back in December, the entertainment giant had launched a new subscription plan in the US, which includes advertisements at a cost of $7.99 for Disney+. The "trio" bundle (including Hulu and ESPN+) with ads, is priced at 12.99/month. The price of the ad-free versions was bumped to $10.99 and 19.99 respectively. [10]

This is definitely not low, as Netflix which had launched its own ad-free version a month earlier, is a full US Dollar cheaper on both offerings [11]. WarnerBros.Discovery's upcoming rebranded Max streaming service will start at $9.99/month without ads. [12]

Pricing Power

Disney's direct-to-consumer options are not cheap, but its CEO did not only speak of "successful" price changes, but also of plans to set "a higher price" for the ad-free tier later in the year. He appeared pleased with the ad-supported plan and its prospects, while also announcing its European expansion by the end of 2023. [4]

Even though high inflation and increased competition call for lower subscription cost, yesterday's metrics of the direct-to-consumer business and relevant commentary, show that Disney has pricing power – given of course its robust content. Although it relinquished a significant number of users, this was mostly a result of the losses in India. Furthermore, operating losses narrowed and Revenues increased, in a promising sign.


After a long period of streaming growth, Disney has been losing subscribers over recent quarters amidst increased competition that provides more option to consumer and an unfriendly environment of elevated interest rates and inflation.

Despite those headwinds, the firm stayed ahead of Netflix and the DTC financials improved, while showing that it has pricing power. Furthermore, it has an impressive content slate and its rationalization, if executed properly, can keep it in a dominant position.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



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