M+E Connections

Disney Plus Continued to Outpace Company’s Expectations in Q1, CEO Says

Disney Plus continues to see strong demand just over one year since its launch, with subscriptions increasing to 94.9 million subscribers by the end of Disney’s first quarter (ended Jan. 2), according to Bob Chapek, the company’s CEO.

“We’ve been especially pleased with the success of our direct-to-consumer” (DTC) business overall, he said on an earnings call Feb. 11. The company’s recent strategic reorganization has “enabled us to accelerate the company’s pivot toward a DTC first business model and further grow our streaming services,” he noted.

The company’s other DTC services, ESPN Plus and Hulu, have also “performed well, with 12.1 million and 39.4 million subscriptions, respectively,” he noted. Combined, there are now 146.4 million Disney DTC subscribers.

Up next, on Feb. 23, Disney will launch its new international general entertainment offering, Star, across Europe, Canada, Australia, New Zealand and Singapore, Chapek pointed out.

“Star will offer thousands of hours of movies and television from the company’s multiple studios, including content from our acquisition of 21st Century Fox, along with Star-branded exclusive originals and local programming tailored to specific markets,” he said.

The new service will be integrated into Disney Plus “as a distinct sixth brand tile, and will offer easy to use parental controls to manage access to the content available on Star,” he said, adding: “We’re less than two weeks away from launch, and we’re seeing tremendous excitement among consumers.”

DTC Revenue Soars

DTC was the one strong business for Disney in Q1, with revenue increasing 73% from a year ago to $3.5 billion.

The “improved results at all three of our streaming services drove an improvement in direct-to-consumer operating results of nearly $650 million versus the prior year,” according to Disney CFO Christine McCarthy.

“At Hulu, the improvement in the first quarter versus the prior year was due to both subscriber and advertising revenue growth, partially offset by higher programming and production costs,” she told analysts.

The 39.4 million paid Hulu subscribers included 4 million Hulu live digital multichannel video programming distributor (MVPD) subscribers, she noted.

Disney Plus’s global net additions were 21.2 million versus Q4 and Disney Plus Hotstar subscriber additions “continued their strong growth trend,” with those subscribers making up about 30% of the global subscriber base, she said.

“We also saw strong additions to our subscriber base from our November launch in Latin America,” she pointed out.

Soul’s Success

Disney released the Pixar animated film Soul on Christmas Day at select theaters and on Disney Plus at no extra charge to subscribers, unlike what it did with the release of the live action Mulan earlier in 2020.

“We thought that was a really nice thing to do for our consumer base and our subscriber base” with Soul, “given the holiday and given the fact that we have talked consistently about remaining flexible in terms of how we’re going to go ahead and put our titles out into the marketplace,” Chapek said during the Q&A.

“We were absolutely thrilled by what that brought to our business in terms of both acquisition and retention. And so, I would say it was a big hit with our subscriber base,” he said.

Soul has “taken in nearly $100 million at the global box office” since its release, according to Chapek.

Disney still plans to release the Marvel movie Black Widow, he went on to say. “But, again, we are going to be watching very carefully the reopening of theaters and the consumer sentiment in terms of desire to go back to theaters to see whether that strategy needs to be revisited,” he conceded.

So, “as of now, the strategy is to continue on with the theatrical release, and we’ll be watching very, very carefully,” he said. The movie is currently scheduled to be released May 7 in the U.S.