M+E Connections

Disney Plus subscribers continued to grow in Disney’s first quarter (ended Jan. 1) and there remains significant opportunities to attract new subscribers to the streaming service, according to Bob Chapek, the company’s CEO.

Disney’s streaming services overall ended Q1 with 196.4 million total subscriptions after adding 70.4 million in the quarter, including 11.8 million Disney Plus subscribers, he told analysts Feb. 9 on an earnings call. The company ended the quarter with almost 130 million global paid Disney Plus subscribers.

“We continue to manage our services for the long-term and maintain confidence in our guidance of 230 [million] to 260 million total paid Disney Plus subscribers globally by the end of fiscal 2024,” he said.

During the Q&A, he told analysts: “We still have some headroom in each one of our major franchises in terms of… fans that have expressed interest in subscribing” to Disney Plus. “So we are not nearly tapped out on each of the major franchises if someone identifies as a Lucas fan, Star Wars or as a Marvel fan or as a Disney fan.”

But he said: “The biggest opportunity in terms of significance is with general entertainment being added to the service.” The company just added a few of its TV shows to Disney Plus that fall under that umbrella, including the ABC show Black-ish, he noted.

“I think that will be a trend of us taking more general entertainment and moving it over to Disney Plus because… slightly over 50% of our consumer base on Disney Plus do not have kids,” he told analysts. “It’s a very broad general service, of course, driven by the Disney brand and driven by families, but what we’ve seen time and time again is that the elasticity of Disney and its brand is much greater than we might have given it credit.”

And “nowhere does [that] play out more” than on the international side of Disney’s streaming services, he said. One thing that is “going to drive the international business is the predominance of local content that we are developing in order to appeal to the unique taste of each of those international markets,” he told analysts, reiterating what he said on the prior earnings call: There are 340 productions that Disney is developing.

Disney also “just created a new organization within our company to shepherd the development of that content so that we can maximize the chance that we get some global hits, if you will, out of some of that local content,” he added.

Therefore, “we’re bullish on the future of Disney Plus, both domestically and internationally, driven by not only additional prevalence of titles within our major franchises, but also general entertainment and specifically in the international territories local content,” he said.

Another Price Increase Not Likely Coming Soon

Based on what Chapek told analysts, meanwhile, it seems likely that Disney does not have immediate plans to again increase the price of Disney Plus following a price jump in early 2021.

“We’ve maintained that we offer an extraordinary price value relationship around the world for Disney Plus,” he told analysts. “Obviously, the last few years, pretty much the entirety of the launch of Disney Plus [has] been plagued by COVID-related production interruptions. Plus, in all fairness, our own recognition that we needed to essentially double our production output. You put those two things together and we certainly have less content than we want. But as we’ve said over the last few earnings calls, that will rectify itself in the second half of this year.”

Disney “already reached one of our two goals,” which was to make sure it had a new title to add to Disney Plus every week, he noted. “But by ’23, we want to get to a steady state which is even higher than we have right now. And I think that will give us the impetus to increase that price value relationship even higher and then have the flexibility if we were to so choose to then look at price increases on our service.”

After all, Chapek told analysts: “It’s all about content, content, content and we are bullish about our future content going forward, not only in terms of quality, but also in terms of quantity. And that’s really what’s driving our bullishness for what we might see as the pricing power that we would have going forward.”

More Sub Data

The company added 4.1 million paid domestic Disney Plus subscribers, including a benefit of about 2 million incremental subscribers from the company’s “strategic decision to include Disney Plus and ESPN Plus as part of a Hulu Live subscription,” according to Disney CFO Christine McCarthy.

At ESPN Plus, we ended the first quarter with over 21 million paid subscribers, up from 17 million in Q4.

In international markets, excluding Disney Plus Hotstar, the company added 5.1 million paid subscribers, “primarily driven by growth in Asia Pacific and European markets,” she told analysts. The company was, meanwhile, “able to resume growth in Disney Plus Hotstar markets with 2.6 million paid subscriber additions in the quarter,” she said.

Overall, the company was “pleased with Disney Plus subscriber growth in the quarter, and are looking forward to new market launches and a strong content slate later this year,” she told analysts.

Disney’s total Q1 revenue grew 34% to $21.8 billion from $16.2 billion a year earlier. Net income from continuing operations increased to $1.2 billion from $29 million a year ago, while diluted earnings per share from continuing operations increased to 63 cents from only 2 cents in Q1 a year ago.