M+E Connections

Disney ended the third quarter with 116 million global paid Disney Plus subscribers, up from about 104 million at the end of the second quarter, according to Christine McCarthy, the company’s CFO.

Disney Plus Hotstar, which launched in India last year, accounted for the majority of the net Disney Plus subscriber additions between the two quarters, “making up a little less than 40 percent of our total Disney Plus subscriber base” as of July 3,  the end of Disney’s Q3, she told analysts on an earnings call Aug. 12.

“However, subscriber growth was also solid” in the company’s core Disney Plus markets, excluding Disney+ Hotstar, with total quarter-over-quarter net adds in those markets consistent with net adds from Q2, she said.

“On the direct-to-consumer side” of Disney’s business overall, the company was “extremely pleased with the continuing success of our portfolio of streaming services,” according to CEO Bob Chapek.

Disney Plus, ESPN Plus and Hulu have “performed incredibly well, with 116 million, 14.9 million and 42.8 million subscribers, respectively, for a total of nearly 174 million subscriptions” combined across the three DTC services, he told analysts.

Total Disney DTC operating income improved by over $300 million in Q3 from a year ago, “driven by Hulu [but] partially offset by a higher loss at Disney Plus,” McCarthy said. “The increase at Hulu was due to growth in subscription and advertising revenue, partially offset by higher programming costs related to Hulu Live,” she noted.

Hulu’s 42.8 million paid subscribers at the end of Q3 was up from 41.6 million in Q2, including the Hulu Live digital multiple video programming distributor (MVPD) service, she added.

However, paid subscribers to Hulu Live “decreased slightly to 3.7 million from 3.8 million at the end of Q2,” she said.

ESPN Plus Q3 operating results were “comparable versus the prior year” and that streaming service ended the quarter with 14.9 million paid subscribers, “reflecting over 1 million net subscriber additions versus the second quarter,” she noted.

Several Disney Plus “breakout hits” from the company’s top brands, including Pixar’s Luca and Marvel’s Loki and The Falcon and the Winter Soldier, “contributed to strong engagement and new subscriber growth in core Disney Plus markets,” Chapek said.

The company has continued to launch Disney Plus in new markets around the world, including Disney Plus Hotstar in Malaysia and Thailand in Q3, he noted.

Disney Plus is also available in a “limited capacity in Japan and will expand to the full market in late October, followed by additional APAC markets, including South Korea, Taiwan and Hong Kong in mid-November,” he told analysts.

The launch of Disney Plus in Eastern Europe, however, has “moved from late 2021 to summer of 2022, primarily to allow for an expanded footprint that will include parts of the Middle East and South Africa,” he disclosed. Star Plus will launch throughout Latin America later this month, he also said.

“As we’ve said, our direct-to-consumer business is the company’s top priority,” Chapek said. Among the company’s “unique advantages in promoting and growing our DTC service are our powerhouse brands and the vast array of direct consumer touch points we have across our businesses, from our media networks to our theme parks to our consumer products,” he explained. “This synergy enables us to raise consumer awareness and further increase engagement with our streaming services.”

The “power” of that “synergy will be on full display on November 12, when we celebrate Disney Plus Day with an unprecedented companywide cross-promotional campaign,” he told analysts.

The company’s “robust pipeline of content continues to fuel growth and we have an incredible lineup of new programming for Disney Plus” coming, he said. On Thanksgiving Day, Disney Plus will premiere the first of director Peter Jackson’s six-episode Beatles documentary Get Back, Chapek said.

Also coming are new Marvel, Star Wars and National Geographic series later this year, including Marvel’s Hawkeye starring Jeremy Renner and Hailee Steinfeld, The Mandalorian spin-off The Book of Boba Fett and National Geographic’s Welcome to Earth with Will Smith, he noted.

\In movies, the company will continue with its “three-pronged strategy” for distribution due to the pandemic, he told analysts. Some films are only being distributed theatrically by Disney, while other releases are also being offered on Disney Plus at the same time for no extra cost and others are being offered in theaters and on Disney Plus Premier Access for an extra charge, he noted.

“Distribution decisions are made on a film by film basis based on global marketplace conditions and consumer behavior,” Chapek said, adding: “We will continue to utilize all available options going forward, learn from insights gained with each release and innovate accordingly while always doing what we believe is in the best interest of the film and the best interest of our constituents.”

Total Disney Q3 revenue grew 45% from a year ago to $17 billion, up from $11.8 billion in the year-ago quarter. The company, meanwhile, swung to a $923 million (50 cents a share) profit from continuing operations after reporting a loss of $4.7 billion ($2.61 a share) in Q3 last year.