Disney has more streaming subscribers than Netflix but lower revenue

The headline from Disney’s quarterly earnings on Wednesday seemed to show a notable milestone: The Mouse House had a total of 221.1 million subscriptions across its streaming services worldwide. In terms of that individual metric, that means Disney is now just ahead of Netflix, which ended the second quarter with a total of 220.7 million paid subscribers.

But the value of these subscriber bases is very different.

Domestically, Disney+, for example, generated about 39% as much revenue per subscriber as Netflix in the second calendar quarter, a metric known in the financial world as ARPU (average revenue per user). And abroad, the contrast is even more stark: Disney+ Hotstar, which is available in India and other Southeast Asian countries and accounts for 38% of Disney+’s total subscriber base, had an ARPU of $1.20/month for the quarter ended July 2 , while Netflix had an ARPU of $8.83/month for the Asia Pacific region.

When Disney+ first launched in November 2019, it quickly gained market share by offering the streamer at the low, low price of $6.99/month — almost half of Netflix’s standard plan at the time.

But that low entry point has resulted in Disney’s flagship streamer making less money than Netflix, the historic industry leader. For the three months ended July 2, Disney+ (US and Canada) domestic ARPU was $6.27 per month, down 5% year-on-year, likely reflecting a shift towards the Disney Bundle and the inclusion of Disney+ (and ESPN+) is traced into the Hulu + Live TV package. In comparison, Netflix reported Q2 ARPU of $15.95 per month in the US/Canada region, up 10% on price hikes.

Now Disney+ is trying to improve its profitability profile as US streaming subscriber growth has slowed not just for Disney+ but for almost all players in the business: In the US and Canada, Disney+ added just 100,000 paid subscribers last quarter and thus reaching 44.5 million.

Simultaneously with the release of the results, Disney announced a large 38% price increase for the “premium” ad-free version of the Disney+ service, which will increase to $10.99/month on December 8, 2022, when the media company will launch Disney+ Basic, an ad-supported tier that will be available at the previous price of $7.99/month.

That’s supposed to boost Disney+’s ARPU, of course, with the combination of the price increase (offset by the inevitable churn that results) and Disney+’s ad-supported base tier, which could produce a higher ARPU if the mouse house can successfully monetize it at the high ad prices that executives have been touting.

Disney expects Disney+ to be profitable in fiscal 2024 (which ends in September). The media conglomerate’s streaming losses soared last quarter: Disney’s direct-to-consumer revenue for the quarter was $5.06 billion, up 19% — but below Wall Street’s expectations of $5.2 billion US dollars per fact set. Operating loss for the DTC segment increased to $1.06 billion from $293 million in the same period last year.

“As a result of this slowdown in new subscriber growth, we have seen many in the industry transition to a new wave of sobriety” — focusing on the profitability of streaming, MoffettNathanson chief analyst Michael Nathanson wrote in an Aug. 11 research note. “We on Wall Street have noticed that. Gone are the sum-of-the-parts models that use revenue multiples or even EV/content spend metrics. From now on, we hope the focus for streamers will be on return on invested capital and free cash flow generation.”

Also note that while Disney expects “core Disney+” growth to stay on track through 2024, the company is trimming Disney+ Hotstar projections for that period given the loss of Indian Premiere League cricket rights Has. Warning of a slowdown in India, Disney lowered the subscriber goal for Disney+ overall to 215-245 million subscribers worldwide by the end of fiscal 2024, down from 230-260 million previously.