Disney's Streaming Services: Disney+ (and Hulu, ESPN+, Star, & hotstar)

[MisterPenguin]

I keep seeing people state (as though it were fact) that Disney's streaming model is not viable. But my understanding it that the plan all along was to:

• Spend like crazy with no concern for profitability until fiscal 2024
• Put every piece of content on Disney+ in order to...
• Build a huge subscriber base (which they did)
• Track user data in order to get the insights they need to
• Produce (or purchase) content that resonates with various user bases
• Connect content to products and services
• Print money

Now, of course, the landscape has changed. Investors are antsy, the stock is down, consumers aren't loyal, the economy is uncertain, etc. etc. So Iger comes back and is going to try to get to profitability more quickly. It sounds like he's going to:

• Cut costs (plenty of opportunity to do this!)
• Sell ads (ad-supported tier), and
• Connect to products and services more quickly/aggressively

Currently, Disney+ costs $11/mo. or $7/mo. w/ads. And according to reports, Disney+ has something like 175M subscribers. Doesn't that come out to something like $2B/month? (Yes, I know some people don't pay full price, but it seems like the targeted ads should to bring in big money.)

Disney will still need to address subscriber retention and find the balance between quality and quantity, but how is this not a viable business model? What am I missing?

Wall Street ain't getting paid their dividends *NOW*.

Wait two more years for profitability? That's a suckers' game for... investors.

 

[TP2000]

Currently, Disney+ costs $11/mo. or $7/mo. w/ads. And according to reports, Disney+ has something like 175M subscribers. Doesn't that come out to something like $2B/month? (Yes, I know some people don't pay full price, but it seems like the targeted ads should to bring in big money.)

Disney will still need to address subscriber retention and find the balance between quality and quantity, but how is this not a viable business model? What am I missing?

I have all those same questions about streaming in general, and Disney+ specifically. It's baffling to me.

They've got a global subscriber base that generates $2 Billion in monthly cash flow, and they can't show a profit off that???

How much per month are they spending to stream all that content? It obviously requires massive energy hog data centers placed around the world, but do those need $1 Billion or more per month to keep running and sucking up electricity? Data centers must play a huge role in the streaming business to keep it all... streaming. But is that where all the profit goes each month? To electricity bills and server farm maintenance?

A terrawatt is one Trillion (with a T) watts of electricity.

175 Million people pay Burbank $2 Billion per month like clockwork, all directly sent from private bank accounts. And that business model isn't profitable??? How on earth?.... Why? Where does all the money go each month?

 

[Disney Irish]

I have all those same questions about streaming in general, and Disney+ specifically. It's baffling to me.

They've got a global subscriber base that generates $2 Billion in monthly cash flow, and they can't show a profit off that???

How much per month are they spending to stream all that content? It obviously requires massive energy hog data centers placed around the world, but do those need $1 Billion or more per month to keep running and sucking up electricity? Data centers must play a huge role in the streaming business to keep it all... streaming. But is that where all the profit goes each month? To electricity bills and server farm maintenance?

A terrawatt is one Trillion (with a T) watts of electricity.

View attachment 686872

175 Million people pay Burbank $2 Billion per month like clockwork, all directly sent from private bank accounts. And that business model isn't profitable??? How on earth?.... Why? Where does all the money go each month?

It goes to spend on content.

Disney in 2022 spent ~$30B in new content across all their business units. If we use the ~$2B per month in D+ subs that is a yearly take of ~$24B, however we know that is a bit lower due to some having lower sub cost. Its been stated since D+ launch in 2019 they were spending ~$8B+ more in content yearly over their normal content spend to add new content to D+. And its been expected that D+ would run at a loss until 2024 in order to gain subs quickly.

As of their most recent quarterly statement they are running at an operating loss of $1.5B, and its due to content costs.

So really if they spend less in 2023 on content it'll be profitable. Or they could reintroduce the Premier Access revenue stream. Either way its not a high mountain to climb to make D+ profitable.

And no they aren't spending Billions on data center electricity costs.

 

[MarvelCharacterNerd]

Thanks. I had no idea what you were referring to!
I also had no idea that he has red hair!

Oh so many pretty British boys in the MCU are redheads!

Here's your next shocker if unaware -

Paul Bettany could be considered more of a strawberry blonde though -

 

[DCBaker]

"After opting to skip a French theatrical release with its latest animated film “Strange World,” Disney+ is nearing a deal with French TV groups over their respective windows.

Disney+ had decided to stream “Strange World” directly on its service in France to protest the country’s strict windowing rules, which only apply to films first shown in theaters. In France, windowing is not a contractual issue as in most other countries; it’s regulated by a decree that sets exclusive windows for each distribution platform, kicking off with theaters, then pay-TV and transactional VOD and free-to-air channels, as well as SVOD.

Guidelines in early 2022 set the window for subscription-based services like Disney+ at 17 months following French theatrical release. They are less restrictive than the previous window, which required consumers to wait a lengthy three years after the theatrical rollout. But streamers say it’s not enough of a concession, since the new guidelines only apply to films produced in-house or by subsidiaries in the case of Disney with Disney/Pixar and Marvel movies, and Amazon with MGM titles such as James Bond movies.

Disney’s protest was sparked by the French requirement that streaming services temporarily pull their own movies from their platforms five months after streaming begins so that free-to-air channels, such as TF1, France Televisions and M6, can have their own exclusive window which starts 22 months after a film comes out in cinemas and lasts 14 months.

An amendment to the windowing rules is currently being negotiated for movies produced in-house by streaming services that are budgeted above $25 million. If approved by all parties, the change will allow services such as Disney+ and Amazon to extend the length of their SVOD window by two months, up to 22 months after the release in cinemas. In addition, instead of having to pull these films from their services during the entire free-to-air channel windows, platforms will only be required to withdraw them for 60 days from the first day of airing on free-to-air channels.

“We’ve almost reached a compromise with these services, but we’re making the biggest effort,” said a source close to one of France’s free-to-air TV groups.

All other parties such as pay TV group Canal+ would need to sign off on the new amendment."

Full article below.

Disney+ Nears Windowing Deal With French TV Groups After Skipping ‘Strange World’ Theatrical Release

After opting to skip a French theatrical release with its latest animated film “Strange World,” Disney+ is nearing a deal with French TV groups over their respective windows. Disney+ ha…

variety.com

 

[brb1006]

'Dug Days: Carl’s Date' Coming To Disney+ in 2023 - Disney Plus Informer

www.disneyplusinformer.com

 

[BrianLo]

I keep seeing people state (as though it were fact) that Disney's streaming model is not viable. But my understanding it that the plan all along was to:

• Spend like crazy with no concern for profitability until fiscal 2024
• Put every piece of content on Disney+ in order to...
• Build a huge subscriber base (which they did)
• Track user data in order to get the insights they need to
• Produce (or purchase) content that resonates with various user bases
• Connect content to products and services
• Print money

Now, of course, the landscape has changed. Investors are antsy, the stock is down, consumers aren't loyal, the economy is uncertain, etc. etc. So Iger comes back and is going to try to get to profitability more quickly. It sounds like he's going to:

• Cut costs (plenty of opportunity to do this!)
• Sell ads (ad-supported tier), and
• Connect to products and services more quickly/aggressively

Currently, Disney+ costs $11/mo. or $7/mo. w/ads. And according to reports, Disney+ has something like 175M subscribers. Doesn't that come out to something like $2B/month? (Yes, I know some people don't pay full price, but it seems like the targeted ads should to bring in big money.)

Disney will still need to address subscriber retention and find the balance between quality and quantity, but how is this not a viable business model? What am I missing?

You are not wrong. The issue about why they are currently not making money comes down to their average revenue per user. The 3$ a month US subscription increase won't really begin to shake through until Q3 (Jan-March) financial data that won't be released until late April or early May. Pre-increase ARPU amongst everywhere but India (which is excessively cheap) was only 5.96 USD per user.

The 3$ price increase this month represents a 37% jump. While they'll never see the top end at 11.99 per user due to annual subscriptions and bundling, I do think ARPU will trend towards that 35% or so increase by the end of 2023. Or a little over 8 dollars. Some of that is contingent on the international markets also having price increases.

Revenue for three months was 4.9 billion for D+ with a 1.5 billion loss. Applying the same multiple if operation costs don't change drastically they should be positive 300million over Q1 2024.

D+ is easily viable if they charge consumers properly for it, which they finally are. I think this was the plan all along (heavily discount the service until now), but Chapek's extreme weakness was his inability to communicate and reassure.

D+ Hotstar on the other hand needs ads to be profitable. In my opinion the default should be ads in that market. The current ARPU is 58 cents a month, which is kind of laughable. But I guess they see India as a loss leader with future prospects. Better to indoctrinate the populace now and in 25 years when they become a major economy they can benefit from it. Versus China which really was Disney naive until after they already were a large player.

But the trouble on the current math is you can't multiply 174 million subscribers by 11 dollars a month when 50 odd million are paying 58 cents.

 

[Phroobar]

That is like saying Genie+ Lightning Lane wouldn't cause as many crowding issues if Disney properly raised the price to be like the rest of industry.

 

[Disney Irish]

That is like saying Genie+ Lightning Lane wouldn't cause as many crowding issues if Disney properly raised the price to be like the rest of industry.

Actually not the same at all.

 

[Disney Irish]

You are not wrong. The issue about why they are currently not making money comes down to their average revenue per user. The 3$ a month US subscription increase won't really begin to shake through until Q3 (Jan-March) financial data that won't be released until late April or early May. Pre-increase ARPU amongst everywhere but India (which is excessively cheap) was only 5.96 USD per user.

The 3$ price increase this month represents a 37% jump. While they'll never see the top end at 11.99 per user due to annual subscriptions and bundling, I do think ARPU will trend towards that 35% or so increase by the end of 2023. Or a little over 8 dollars. Some of that is contingent on the international markets also having price increases.

Revenue for three months was 4.9 billion for D+ with a 1.5 billion loss. Applying the same multiple if operation costs don't change drastically they should be positive 300million over Q1 2024.

D+ is easily viable if they charge consumers properly for it, which they finally are. I think this was the plan all along (heavily discount the service until now), but Chapek's extreme weakness was his inability to communicate and reassure.

D+ Hotstar on the other hand needs ads to be profitable. In my opinion the default should be ads in that market. The current ARPU is 58 cents a month, which is kind of laughable. But I guess they see India as a loss leader with future prospects. Better to indoctrinate the populace now and in 25 years when they become a major economy they can benefit from it. Versus China which really was Disney naive until after they already were a large player.

But the trouble on the current math is you can't multiply 174 million subscribers by 11 dollars a month when 50 odd million are paying 58 cents.

Honestly while a lot of people like to talk about ARPU, really revenue is revenue. Whether its a US sub who might have a higher ARPU or an Indian sub who might have a lower ARPU. Sure a higher average ARPU might show trends where subs are going longer term, in the end its not a GAAP measure.

Also really the only way to get APAC subs like Indian subs to get a higher ARPU is to get them to a higher tier. That is not a sure fire plan as the whole reason to keep lower tiers in that region is to get more subs, as that is your growth region. And with Hotstar being the dominant service in the region you want to keep it lower, which why you won't see ARPU rise for a long time.

 

[BrianLo]

That is like saying Genie+ Lightning Lane wouldn't cause as many crowding issues if Disney properly raised the price to be like the rest of industry.

It’s not even the rest of the industry I’m comparing to. Global ARPU for D+ is 3.91 and Hulu 12.23

I’m not including Hulu + SVOD which is an astronomical 86.77. But that’s the type of strange math the streaming age has jumped to, nearly a 90% cheaper alternative to cable to goose their subs.

I’m actually saying the opposite of your point. If you raise the prices on Genie+ I don’t think you see significantly less purchases. If you raise prices on D+ I don’t think you see a subscriber drop. All you see in both circumstances is more money for Disney.

 

[BrianLo]

Honestly while a lot of people like to talk about ARPU, really revenue is revenue. Whether its a US sub who might have a higher ARPU or an Indian sub who might have a lower ARPU. Sure a higher average ARPU might show trends where subs are going longer term, in the end its not a GAAP measure.

Also really the only way to get APAC subs like Indian subs to get a higher ARPU is to get them to a higher tier. That is not a sure fire plan as the whole reason to keep lower tiers in that region is to get more subs, as that is your growth region. And with Hotstar being the dominant service in the region you want to keep it lower, which why you won't see ARPU rise for a long time.

I’m actually not criticizing their strategy. Quite the opposite actually. Just for some reason they have done a terrible job of actually explaining why what they are doing makes sense. Albeit, perhaps they could have done with another dollar raise last year.

The solution to Hotstar ultimately I think is ads. I don’t know what type of revenue they could generate in India, but surely it’s more than 58 cents.

 

[Disney Irish]

I’m actually not criticizing their strategy. Quite the opposite actually. Just for some reason they have done a terrible job of actually explaining why what they are doing makes sense. Albeit, perhaps they could have done with another dollar raise last year.

The solution to Hotstar ultimately I think is ads. I don’t know what type of revenue they could generate in India, but surely it’s more than 58 cents.

Ads will help in India, but I think ultimately its a region that is always going to have a low ARPU. Which is why its not likely to ever be included in the GAAP numbers. ARPU will become a good measure for the AVOD tier, but for the rest of SVOD tiers its really not an important measure, like I said revenue is revenue. Someone that logs in once a month in a SVOD tier is the same as someone who logs in 300x a month in the same SVOD tier.

 

[doctornick]

One thing I will say is that it finally feels like Disney+ has the constant trickle of content so there’s generally “something new” all of the time. And not just like small little shorts that you are done in 5 minutes.

Now granted, we tend to watch and enjoy most of the content, but at least with my family there’s generally something we haven’t gotten to if we put on D+ and want to watch something new. Last night for example we were all together and had time so we watched the National Treasure episodes. While the kids are off from school this week we’ll see Strange World and finally watch Benedict Society which we wanted to binge but haven’t all been together. And they are looking forward to Bad Batch.

It just really feels like a complete robust service now. We are in the US though so it would probably be different with Star though if that was part of it.

 

[Disney Analyst]

One thing I will say is that it finally feels like Disney+ has the constant trickle of content so there’s generally “something new” all of the time. And not just like small little shorts that you are done in 5 minutes.

Now granted, we tend to watch and enjoy most of the content, but at least with my family there’s generally something we haven’t gotten to if we put on D+ and want to watch something new. Last night for example we were all together and had time so we watched the National Treasure episodes. While the kids are off from school this week we’ll see Strange World and finally watch Benedict Society which we wanted to binge but haven’t all been together. And they are looking forward to Bad Batch.

It just really feels like a complete robust service now. We are in the US though so it would probably be different with Star though if that was part of it.

Star really added a lot of great extra content up here in Canada. Has felt like a robust service for a long time now.

Glad the US branch is catching up

 

[Disney Irish]

Interesting read....

'Peak TV' is coming to an end as streaming services look to cut costs

Orders for scripted series for adults fell 24% in the second half of 2022 from a year ago and have dropped 40% since 2019.

www.marketwatch.com

Stuff we've been talking about for a while now, streaming costs need to come down, etc. What's even more interesting is that Amazon and Apple continue to spend like there is no tomorrow. Meaning their streamers are going to be losing money for a long time, and only hidden by other profits made elsewhere in the companies.

Which leads to my thoughts, if the other Disney business units were doing gangbusters would analysts even care that DTC was losing money? I would think not. So they only focus on DTC because the other units aren't doing well enough to hide the losses. Which is why you get these silly suggestions like the Wells Fargo analyst saying spin-off ESPN and ABC.

 

[MarvelCharacterNerd]

Interesting read....

'Peak TV' is coming to an end as streaming services look to cut costs

Orders for scripted series for adults fell 24% in the second half of 2022 from a year ago and have dropped 40% since 2019.

www.marketwatch.com

Stuff we've been talking about for a while now, streaming costs need to come down, etc. What's even more interesting is that Amazon and Apple continue to spend like there is no tomorrow. Meaning their streamers are going to be losing money for a long time, and only hidden by other profits made elsewhere in the companies.

Which leads to my thoughts, if the other Disney business units were doing gangbusters would analysts even care that DTC was losing money? I would think not. So they only focus on DTC because the other units aren't doing well enough to hide the losses. Which is why you get these silly suggestions like the Wells Fargo analyst saying spin-off ESPN and ABC.

Problem is no spend = even more churn.

I re-upped D+ for another year and already regret it as I've watched exactly two movies in two months (one new directly to service and one oldie but goodie just because it was there). Whereas I've been binging the heck out of HBOMax while I have a great 3-month super cheap rate. By the end of those three months I'll have watched everything on there I wanted to (except for Westworld which was removed from the service before I could even start it) and will drop the service.

This will leave me with only D+ which only has Black Panther: Wakanda Forever coming up in the next few weeks/months that I want to see. More stuff will be arriving in the summer I think - new Marvel and Mando - but I'm now kicking myself for wasting $$ on the service for nothing left to watch in between. So lesson learned that I don't need D+ year round either.

They are all binge and churn services, especially at the high price points. I probably would keep HBOMax or Amazon Prime year round for $5/month, but certainly not for what either regularly charges. And I definitely don't need what is now clearly a more niche streamer ala D+ or Paramount+ that I will want to see maybe 2-3 times a year for specific new content but am otherwise not using at all.

Either feed the beast to make it worth constantly keeping (hey Disney, WHERE is all the classic vault content I've waited three years to see and you still haven't added it??) or drop the prices big time. Otherwise it's churn, churn, churn.

 

[Disney Irish]

Problem is no spend = even more churn.

I agree, which is why they are still spending money on content it'll just be less money. Which will likely lead to production costs being slashed.

I re-upped D+ for another year and already regret it as I've watched exactly two movies in two months (one new directly to service and one oldie but goodie just because it was there). Whereas I've been binging the heck out of HBOMax while I have a great 3-month super cheap rate. By the end of those three months I'll have watched everything on there I wanted to (except for Westworld which was removed from the service before I could even start it) and will drop the service.

This will leave me with only D+ which only has Black Panther: Wakanda Forever coming up in the next few weeks/months that I want to see. More stuff will be arriving in the summer I think - new Marvel and Mando - but I'm now kicking myself for wasting $$ on the service for nothing left to watch in between. So lesson learned that I don't need D+ year round either.

They are all binge and churn services, especially at the high price points. I probably would keep HBOMax or Amazon Prime year round for $5/month, but certainly not for what either regularly charges. And I definitely don't need what is now clearly a more niche streamer ala D+ or Paramount+ that I will want to see maybe 2-3 times a year for specific new content but am otherwise not using at all.

Either feed the beast to make it worth constantly keeping (hey Disney, WHERE is all the classic vault content I've waited three years to see and you still haven't added it??) or drop the prices big time. Otherwise it's churn, churn, churn.

So did you only re-up for Disney movies? Are you not interested in any of their series that come out weekly?

Overall while churn is an issue I think a majority of D+ subs for the most part remain for more than a few movies that come out on the service.

Also in 2024 when Hulu and D+ merge into a single service (just like D+ and Star outside the US) you'll have a lot more content at your finger tips.

 

[Ripken10]

I agree, which is why they are still spending money on content it'll just be less money. Which will likely lead to production costs being slashed.


So did you only re-up for Disney movies? Are you not interested in any of their series that come out weekly?

Overall while churn is an issue I think a majority of D+ subs for the most part remain for more than a few movies that come out on the service.

Also in 2024 when Hulu and D+ merge into a single service (just like D+ and Star outside the US) you'll have a lot more content at your finger tips.

Remember that Iger and Chapek had different views on Hulu and D+. Whether that effects the potential merge you see happening is anyones guess, but Iger has made it very well known his views on this while he wasn't CEO.

 

[Disney Irish]

Remember that Iger and Chapek had different views on Hulu and D+. Whether that effects the potential merge you see happening is anyones guess, but Iger has made it very well known his views on this while he wasn't CEO.

I’ve long had this opinion since launch of D+, and posted the same in this very thread. This was even when Iger was first CEO stating there would never be mature content on D+, which obviously happened. So that opinion isn’t changing as it makes the most business sense long term given how they’ve setup D+ outside the US, which Iger started by the way.