Disney+ reported a 14.4 million subscriber gain in the second quarter, well ahead of industry estimates of a 10M gain. This number puts Disney in sharp contrast with Netflix which reported a (admittedly smaller than forecast) subscriber loss. However, the most attention grabbing number might be 221.1M. That’s the total number of subscribers across all Disney services globally (Disney+, Disney+ Hotstar, Hulu, and ESPN+), which just pulled ahead of Netflix’s total global subscriber count, 220.7M.
While the realization that Disney has beat out Netflix in terms of global subscribers may sound surprising, it really shouldn’t be. Disney has been the leader for a long time in terms of the total demand for shows that fall under its corporate ownership. This quarter’s result is a good indicator that Disney is finally translating their lead in total demand at the corporate level to an advantage in the battle for streaming subscribers.
Expect the future to look more like this as companies claw back the rights to their own content on their streaming platforms. This bodes well for the future of Warner Bros. Discovery as is begins utilizing the full weight of its corporate catalog of content on its soon to be merged streaming platform. It also highlights the urgency facing Netflix as it competes against media conglomerates as they are finally focusing all their resources on winning the streaming race. Its first mover advantage in the streaming wars continues to evaporate.
While the House of Mouse looks to be in a stronger position than ever in the new streaming landscape, several observations should give any Disney executive pause before taking a victory lap:
- A year ago, Disney+ had four of the five most in-demand streaming originals by US audience demand in the April-June quarter. This past quarter it had two.
- In a show of overconfidence, Disney+ scheduled Obi-Wan Kenobi to debut directly against the fourth season of Netflix’s Stranger Things on May 27. Stranger Things drew several times more demand than Obi-Wan Kenobi with both global and US audiences.
- Disney+ pushed back the next Star Wars live action series, Andor, from August 31 to September 21 in order to avoid competing with the debuts of HBO’s House of the Dragon and Amazon Prime Video’s Lord of the Rings: The Rings of Power.
- Losing the Indian Premier League cricket streaming rights will cause Disney’s global subscriber numbers to take a hit.
Disney+’s reliance on franchises — especially Marvel and Star Wars — to drive subscriptions is as strong as ever. Among streamers in the US, Disney is notably dependent on its franchises, with about 50% of demand for its catalog coming from a show belonging to one of its franchises. These properties will help Disney+ retain much of its sizable subscriber base for the foreseeable future, but it remains to be seen how much more Disney+ can grow without branching out beyond these two franchises.
If Disney+ is to look outside of Marvel and Star Wars for subscriber growth, there is a potential option in house. Which brings us to the biggest question for Disney’s streaming ambitions: what is the plan for Hulu?
The service, including FX on Hulu, has accounted for a steady stream of critical hits with Outstanding demand (top 2.9% of all shows) in the past year such as Only Murders in the Building, The Dropout, Dopesick, Reservation Dogs, The Bear and more.
The Disney bundle is one of the best values available to US streaming consumers, but would it make more sense for Hulu and Disney+ be folded into the same app ala Discovery+ and HBO Max? Comcast’s minority stake in Hulu complicates plans for that in the immediate future. In terms of demand for all shows on-platform, Hulu (19.2%) is just behind Netflix (19.4%) and a theoretical combination of Hulu and Disney+ (25.2%) would healthily beat out the coming combination of HBO Max and Discovery+ (17.9%) in US on-platform demand share.
Now that Disney+ is already streaming R-rated Netflix Marvel series, should there be less concern about ‘adult’ programming from Hulu appearing alongside more traditionally family friendly Disney fare?
The ultimate question for Chapek and Disney: in order to create a true four quadrant streaming service, do you need Pam & Tommy next to Lilo & Stitch?