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12 May 2022

Still growing, still loss-making – another day at Disney+

Disney+ added 7.9 million new subscribers in Q1 2022 (Disney’s second fiscal quarter) to total 137.7 million users globally, including the Disney+ Hotstar platform in India.

With Hulu now on 45.6 million subscribers and ESPN+ on 22.3 million, this brings Disney’s streaming empire to 205.6 million users across its global direct to consumer streaming properties.

Yes, Disney is closing the gap on Netflix (221.6 million subs), and yes, Disney will take top spot soon enough, probably by the end of this year – yet this is a high-level, napkin-math view, as shown in the graph below.

We would love to get more granular than this, looking at how many individual subscribers Disney actually has, and how many of these are signed up for multiple video products, but that is currently impossible.

While we know for certain that one Netflix subscription is counted as one subscriber, even if the same account is being used across multiple households, Disney does not adhere to the same accounting principles.

If a household subscribes to a bundle of Disney+, Hulu, and ESPN+, this is counted as three separate subscribers, which is both misleading and totally understandable.

We would much rather Disney break its services out separately than only provide one global, bundled number, which it might decide to do one day.

Of course, Disney is not immune to password sharing either, but the company isn’t being nearly as transparent as Netflix in terms of sharing the scale of the missed opportunity, which the current SVoD leader estimates as approximately 200 million subscribers.

From a year on year perspective, ESPN+ has performed strongest among Disney’s D2C businesses, growing its user base by 62% between Q1 2021 and Q1 2022, virtually double the 33% annual growth seen at Disney+ and dwarfing the 10% annual increase in Hulu subs.

More good news is that ARPU has increased across the board for all D2C streaming services. The biggest ARPU gains came on the Hulu Live TV + SVoD services, increasing from $81.83 to $88.77, while the rise at Disney+ Hotstar – although tiny – is the most significant by far, spiking from $0.49 to $0.76.

This has had a positive impact on total group revenues – rising 23% to $19.2 billion for the quarter.

Within the Disney Media and Entertainment Distribution segment, where revenues increased 9% to $13.6 billion, D2C sales accounted for $4.9 billion, a solid increase of 23%. However, Media and Entertainment income fell 32% to $1.9 billion – driven by a 205% increase in operating loss to imprint an ominous $887 million hole on the latest quarterly income statement.

Disney blames the increase in operating loss on higher losses at Disney+ and ESPN+, as well as lower operating income at Hulu. In other words, all its D2C streaming businesses are still loss making, and will be for a very long time, while Netflix is making tons of money.