Disney+ has added 12 million subscribers and is expected to become profitable in 2024, according to chief executive Bob Chapek.
However, despite adding users and claiming it was at a “turning point” on the road to success, the service still lost AU$2.31 billion in the last three months.
“We believe we are on a path to a profitable streaming business, assuming that we do not see a meaningful shift in the economic climate,” Chapek said on a conference call to discuss the firm’s results.
The huge losses for the streaming service were due to increased programming and production costs, as well as increased marketing and technology costs. The absence of Premier Access, which closed on 30 July and gave subscribers a chance to watch the latest Disney films on the same day they would be released in cinemas, also hit the bottom line.
“The increase in programming and production costs was driven by more content provided on the service and higher average costs, which included an increased mix of original content. Higher subscription revenue was due to subscriber growth and, to a lesser extent, increases in retail pricing, partially offset by an unfavourable foreign exchange impact,” said the company.
Disney is also planning to launch an ad-supported version of Disney+, allowing viewers to use the service for a reduced monthly cost. The ad-supported tier is expected to arrive in Australia in early 2023.
Across its three streaming services, Disney+, Hulu, and ESPN+, Disney now counts more than 235 million subscribers. Netflix, by contrast, has around 223 million.
“Steaming is a costly endeavour mainly due to content creation. Disney, however, proves once more it is capable of very fast growth, and has established itself as a key player in an extremely short timeframe,” Nick Cherrier, APAC chair, Subscribed Institute, Zuora, told B&T.
“It is beginning to transition out of the scaling phase and into what we call the leading phase. At this point, subscriber growth becomes less relevant because you already have considerable penetration, and retention and monetisation take a lead role. “Disney was extremely successful in building a massive global audience very quickly, but it now needs to be profitable. It is unlikely content cost will diminish if it wishes to retain its subscribers, but prices need to rise and ads will help.
“The market is becoming crowded and it is unlikely that all streaming companies will be able to continue operating long-term without capturing a significant share of the market.
“The key for success will be a focus on four things. The first is content – are your shows good enough to attract and retain subscribers? The second is differentiation – what makes you different from competition in a crowded environment? The third is customer experience – how subscriber friendly is your platform and service? And the fourth is monetisation – how do you turn a profit? Are you able to increase prices without losing subscribers?”
