A performer dressed as Mickey Mouse entertains guests during the Disneyland theme park reopening in Anaheim, California, the United States, on Friday, April 30, 2021.
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Disney seems to have picked up a bit of Netflix-itis.
Just as Netflix added less than 4 million subscribers worldwide in the first quarter, disappointing investors, Disney announced that it now has 103.6 million Disney + subscribers, far less than what analysts estimate was 109 million. Disney shares fell around 4% in after-hours trading.
On the surface, both Disney and Netflix can explain the disappointing growth by leading the surge in viewers at the start of the pandemic. The logic is simple: in the first six months of the pandemic, far more people signed up for Disney + and Netflix than the companies expected. Given the spike, it’s only natural that once the pandemic ended, growth would retreat to more “normal” levels.
Additionally, both Disney and Netflix can expect subscriber growth to accelerate in the second half of the year as show production starts again with serious and high profile content like “Loki” and “Luca” for Disney to stream later this year Year.
However, there’s one significant difference between the two companies that Disney falls well short of: average revenue per user.
Disney + average revenue per user excluding India’s hot star was $ 5.61 per month. Netflix’s ARPU was $ 14.25 per month in the US and Canada for the last quarter – up 9% year over year.
If you want to see declining growth, you want your customers to pay as much as possible. Disney’s video-on-demand service for Hulu subscriptions has a higher ARPU – $ 12.08 per month – but its growth has been negligible, only increasing 2 cents per month from the previous year. Hulu has 37.8 million subscribers, which is 41.6 million if those who also buy live TV are factored in.
None of this is of particular concern to Disney Chief Executive Officer Bob Chapek, who stated that “every single market has exceeded expectations” in terms of global subscriber access. He also pointed out that Disney is still expanding into new countries, with Malaysia and Thailand coming in June.
But Disney + has plunged into the big leagues. In 2020, the logical comparison for Disney + HBO was Max, Peacock, and other new media streaming services.
Given Disney’s success, this year’s comparison will be Netflix. Disney has already forecast 230 to 260 million subscribers by 2024. This is Netflix land. Netflix has around 208 million customers.
Netflix has been able to gradually increase prices over the years without stopping global growth. Maybe Disney can do the same – but the stark differences in ARPU between the two companies illustrate the long road ahead.
Disclosure: Peacock is the video streaming service provided by NBCUniversal, the parent company of CNBC.