Disney+ has seen considerable growth since it launched in 2019, and as of early July, the streaming service has 116 million worldwide subscribers. Disney initially revealed it was targeting 90 million subscribers by the end of 2024, but quickly adjusted its targets to reach 260 million subscribers across all of its streaming services by 2024.
However, that growth was always going to be difficult, as, during a recent Q&A session at the Goldman Sachs 30th Annual Communacopia Conference, Disney CEO Bob Chapek revealed that subscriber growth has slowed down.
The thing I think that’s really important about sort of taking a more global approach to our direct-to-consumer business, and this is one thing that I think we are not exactly aligned with the street on is the quarter-to-quarter business is not linear. I think people looked at our projections last December and said, they want to get to 230, 260 or whatever the numbers are and they divided by the number of quarters, say they need to add X per quarter.
What we are finding out as you’ve seen from our last several quarters in terms of our earnings is that these numbers are tend to be a lot noisier than a straight line. They are not a straight line relationship quarter-to-quarter-to-quarter, and indeed we’ve seen some of that this current quarter. We are very confident about our long-term sub growth as we have been.
In Q4, I think what you can expect to see is that our global paid subs will increase by low single-digit millions of subscribers versus Q3. But importantly, our core market sub growth will continue both domestically and internationally in Q4, but we hit some headwinds. Two of the headwinds I already talked about. Latin America, again, trying to mobilize the partners, get that thing going just like we saw with Disney+. In India, the IPL (cricket) shift and the fact that you have got to go back and reclaim all your subscribers all over again, which we are confident we can do, but obviously, it’s sort of a day-by-day, it’s a clawback, if you will.
There are a few key takeaways from Bob’s comments. One is that at the next quarterly financial results, we are likely to see just a single-digit growth in terms of how many subscribers there are. And it seems this generally comes from issues in Latin America and India. Especially with regards to getting back subscribers who only want to watch the IPL cricket.
I would also go a little further and say that during this quarter (August/September/October), there haven’t been any major big Disney+ Originals released to pull in audiences. There are no big live-action Marvel or Star Wars shows to bring in casual audiences. The animated series will appeal to a core audience, but they aren’t mainstream titles. Nor have there been any other show or film that will bring large audiences in.
Disney+ also hasn’t been adding much content from its rich library in that could draw in some subscribers or even utilising some of its biggest hits properly. This is either down to some existing streaming contracts that are keeping content off Disney+ or by them keeping Disney+ within the US strictly within its PG13 zone. The lack of any big binge shows to draw adults in, and repeatable watching is an issue.
This quarter, there is another issue for Disney+ growth, as the international rollout is much slower within these three months. Disney+ is set to launch to a broader audience in Japan at the end of October. Disney+ already is available in Japan, but it was a limited option, and when Disney+ launches properly, it will be adding in the Star brand to add more varied content to appeal to more people.
Yesterday, Disney announced lots of great new content for its “Disney+ Day” event in November, which is undoubtedly a way of getting the majority of its launch period subscribers to resubscribe for another year.
The stock market is watching the subscriber growth with eagle eyes, but it has to accept that going into this winter is very different to last. With many restrictions easing worldwide, more people are outside the house than a year ago due to a successful vaccination plan.
Keeping subscribers happy and appealing to new subscribers is going to be vital for Disney+. Going into the third year of the streaming service, Disney+ can’t rely on just nostalgia to get subscribers. It has to offer new content that can only be found on their streaming services.
What do you think caused Disney+ subscriber growth to slow?