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Disney signed up 26.5 million people to Disney+ by the end of 2019, the company said Tuesday, ending three months of speculation about the early performance of the high-profile new streaming service.
“The launch of Disney+ has been enormously successful, exceeding even our greatest expectations,” CEO Bob Iger said during a call with investors in which he revealed that Disney+ continues to add users at a solid clip, reaching 28.6 million paid subscribers as of Feb 3.
The numbers were in line with expectations for the $7-per-month service, which analysts anticipated would have between 20 million and 25 million subscribers. The company said it defines a subscriber as any user for which it recognizes subscription revenue. Someone who pays for the Disney streaming bundle to get Disney+, ESPN+ and Hulu at a discounted price will be counted as a subscriber for each of those services.
Disney+ is currently only available in a handful of countries, including the U.S., Canada, the Netherlands, Australia, New Zealand and Puerto Rico, but will begin to roll out more widely this spring. With a 26.5 million subscriber base, it is still far behind streaming leader Netflix, which has nearly 68 million subscribers in the U.S. and Canada and 167 million subscribers worldwide. Disney-owned Hulu, meanwhile, has 30.7 million U.S. subscribers as of Feb. 3, up from 30.4 million at the end of 2019. ESPN+ has 7.6 million subscribers, up from 6.6 million at the end of 2019.
The streaming growth was part of a strong fiscal first quarter for Disney, during which it earned $1.53 per share on $20.9 billion in revenue. The period, which covers the three-month period from October to December, also saw the release of $1 billion-plus films Star Wars: The Rise of Skywalker and Frozen 2.
Disney+ launched on Nov. 12 with much fanfare, including an elaborate marketing push that plastered ads for the service and tentpole original series The Mandalorian across bus stops, cruise ships and Disneyland theme parks. Demand was so great on launch day that many people faced technical difficulties when they tried to sign up and stream programming, prompting Disney to issue a statement saying that the interest had “exceeded our high expectations.” The following day, the company revealed that the service already had signed up 10 million subscribers.
Since then, there has been much speculation about how Disney+ has fared, especially as The Mandalorian captured the zeitgeist (and dominated the social media meme landscape) with its Baby Yoda character. A December Cowen & Co. report estimated that the service had racked up 24 million subscribers in the U.S. by the end of November, while a Rosenblatt Securities report from January suggested Disney would report that Disney+ had 25 million subscribers at the end of 2019. Much like streaming rival Netflix, Disney only plans to provide updates on Disney+ growth every quarter.
Disney used several methods to juice subscriptions, including presales that offered a discounted rate for a three-year commitment and a promotion that gave away Disney+ for free to certain Verizon customers. Iger said that around 50 percent of the initial signups came directly through Disney, while 20 percent came through the Verizon promotion.
Those discounts, as well as Disney’s marked-down streaming bundle, pushed the average monthly revenue per paid subscriber for Disney+ down to $5.56 during the fiscal first quarter. Disney said that bundle pushed ARPU lower for both Hulu and ESPN+, as well. Still, Iger said that the bundle also helped decrease churn among subscribers who might have otherwise canceled the service.
Disney has 63.5 million subscribers between its three services, with Hulu accounting for the largest percentage of the memberships, though Disney+ is already close to catching up. The nearly 12-year-old Hulu grew by 33 percent from the same period last year, with 27.2 million people paying for its stand-alone on-demand offering and 3.2 million paying paying for both Hulu on-demand and live TV.
Disney, which on Friday said that Hulu CEO Randy Freer would step down amid plans to integrate the streamer more deeply into its direct-to-consumer business, is expected to take the service international in 2021 once Disney+ has rolled out globally. “We’ve decided that the priority needs to be Disney+,” Iger said during the call. “We feel that we need to concentrate on those [international] launches and then come in with Hulu right after, or soon after, that.”
Disney’s streaming division continues to lose money as the company invests to build up its infrastructure. The direct-to-consumer and international segment lost $693 million during the fiscal first quarter. The company expects Disney+ to be profitable in 2024 and Hulu to be profitable in 2023 or 2024.
Now that Disney+ has launched, Disney will begin to face questions about how it will retain its current subscriber base while also continuing to add new members as it works toward its goal of between 60 million and 90 million subscribers by 2024. Following the Dec. 27 finale of The Mandalorian, Disney+ is now looking for its next breakout hit. It teased the upcoming Marvel shows The Falcon & the Winter Soldier, Loki and WandaVision during the Super Bowl on Sunday.
Meanwhile, executives are hoping that stocking the service with high-profile IP, including all seasons of The Simpsons and Star Wars and Marvel films, will be enough to keep people coming back in between tentpole launches. When asked about the content mix on the service, Iger said, “We’re really comfortable with the volume of product that we’re creating.” The exec also touted the performance of Pixar projects, particularly its short films, as well as musicals on the service, explaining, “It validates the concept of putting those brands together.”
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