Disney’s streaming service, Disney+, has experienced a third consecutive quarter of declining subscribers, mainly due to the loss of 12.5 million paid subscribers from Disney+ Hotstar during the third quarter ending on July 1, 2023. This drop is the largest decline ever recorded since the company started disclosing its paid member count in April 2020.
In response to these losses, Walt Disney Co. CEO Bob Iger has outlined strategies to improve profitability for their streaming services. The company plans to implement a price increase in October for their ad-free Disney+ and Hulu plans. Additionally, Disney aims to crack down on password sharing practices, a measure that will be enforced in the coming year.
The recent quarter revealed a $512 million loss in Disney’s streaming division, contributing to a total streaming deficit of over $11 billion since the launch of Disney+ in 2019. During the same quarter, Disney+ witnessed a decline of approximately 11.7 million subscribers worldwide, leaving the service with a new total of 146.1 million subscribers.
The decline in subscribers for Disney+ Hotstar was primarily driven by the loss of streaming rights to the significant IPL cricket tournament in India. The paid member base for Disney+ Hotstar dropped to 40.4 million during the quarter, marking a 24% reduction from the previous quarter. The service had reached a peak of 61.3 million subscribers in the last quarter of 2022. Interestingly, the decline in subscribers was concentrated in the lower-priced version of Disney+ available in India, while excluding the Indian market, Disney+ gained 800,000 subscribers primarily from overseas regions.
Viacom18 secured the streaming rights for the IPL tournament from 2023 to 2027, streaming the entire tournament for free on JioCinema. Subsequently, Viacom18 partnered with Warner Bros. Discovery to showcase HBO, Max Original, and Warner Bros. content on JioCinema, a move that was previously under Disney’s control.
Elara Capital Analyst Karan Taurani stated that various factors, such as the IPL moving away from Hotstar, JioCinema offering a wide variety of content for free, Disney+ Hotstar offering the ICC Cricket World Cup for free, and the migration of HBO content, have contributed to this decline. Taurani believes that the subscriber loss has bottomed out and may stabilize or experience a slight decline in the near term.
Although Disney reported a 4% revenue increase for the quarter, the company’s net profit shifted from $1.4 billion in the year-earlier quarter to a net loss of $460 million. This loss was attributed to the decrease in customers both domestically and internationally.
To address these challenges, Disney is shifting its focus under Iger’s leadership. Instead of pursuing rapid subscriber growth through expensive marketing campaigns, Disney aims to extract more value from its existing Disney+ subscribers. This approach includes raising the monthly fee for ad-free Disney+ access and introducing similar increases for the ad-free Hulu plan, potentially surpassing Netflix’s pricing.
The media conglomerate intends to increase the cost of its advertisement-free Disney subscription by $3, equivalent to a roughly 27 percent increment, resulting in a new price of $14. Simultaneously, the ad-free Hulu subscription is projected to undergo a $3 price surge, reaching $18 per month. This adjustment would position the service as pricier than Netflix.
The crackdown on password sharing is slated to commence in 2024, with the possibility of extending beyond that year. Analysts suggest that these measures, including the price hike and measures against password sharing, could play a pivotal role in steering Disney towards sustainable growth.
Variety quoted Iger, stating, “Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies, and restore creativity to the center of our business.”
In line with this transformation, Disney is considering strategic options for its TV networks portfolio, acknowledging the changing landscape due to cord-cutting trends. Iger has mentioned that he is considering various options for the company’s TV networks, emphasizing that Disney’s future growth will come from film studios, theme parks, and streaming services, excluding traditional networks like ABC.
ESPN, the sports cable network under Disney, is also exploring strategic partnerships while aiming to retain control of the network. Disney is contemplating the potential sale of linear TV assets, including ABC, as it adapts to the evolving media landscape.
Analysts believe that these changes and measures taken by Disney will lead the company towards sustainable growth and improve its financial performance in the long term.
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Basant Kasayap is an entertainment aficionado who delves into the glitz and glamour of the entertainment industry. From Hollywood to Bollywood to regional cinema, she offers readers an insider’s perspective on the world of movies, music, and pop culture.
