Thursday's Market Minute: Walt Disney (DIS) Bucks Streaming Trend, Subscribers Inch Higher In 3Q

Walt Disney is proving not all streaming companies are created equal. Its direct-to-consumer business Disney+ added 14.4M subscribers in the third quarter, and nearly all the additions were from outside North America. The Street had been anticipating just 10 million additions, according to FactSet. This brings Disney+ subscribers to 152.2M, and 221M in total when considering its other services Hulu and EPSN+. 

Contrast these results with Netflix – which a month ago posted a loss of nearly 1M accounts for the period that ran from April through June. Disney’s total count of 221M subscribers topped Netflix’s second quarter, which came in at 210.67M. 

To further monetize its streaming business, Disney announced plans to launch an ad-supported Disney+ tier in the U.S. by the end of this year, which is expected to cost $7.99 per month (or the same price it charges now without adds). The non-ad tier will increase to $10.99 a month or $109.99 per year, with Hulu’s premium subscription rising to $14.99 per month. ESPN+ price hikes were already announced ahead of earnings and will go into effect at the end of August.

For consumers looking to find the best ‘bang for their buck’, the price of bundling Disney+, Hulu, and ESPN+ will be a dollar per month cheaper with ads at $12.99 (vs. the current price of $13.99 ad-free). The premium version of the bundle will cost $19.99 monthly. Regarding the pricing updates, management said they are providing a greater consumer choice at a variety of price points to cater to the diverse needs of viewers, and appeal to an even broader audience.

But not all was positive in the streaming space for Disney. The company lowered its long-term forecast for Disney+ subscriber growth, saying it now expects to sign up 135-165M to its core service, and roughly 80M to its lower-cost Asian service known as Hotstar - bringing its total range to 215-245M net subscribers by September of 2024. This is meaningfully different tone from the likings of CEO Bob Chapek a few months ago, who forecasted 230-260M total subscribers for Disney+, which he called “very achievable”. 

Ahead of the results, Disney shares had shed 28% this year, but gained 4% amid the broader market rally on Wednesday and ripped higher following the earnings.

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