There were a lot of juicy takeaways afterwards Disney‘s (DIS 2.29%) quarterly report from last week, but there is one misleading metric echoing around the world of streaming media stocks. Did Disney Really Overcome Netflix (NFLX -0.44%) in the subscriber race between premium video-on-demand platforms?
It may seem so at first glance. Disney’s three owned or majority-owned premium offerings combined for 221.1 million subscribers at the end of June. Netflix dipped sequentially over the three-month period, falling back to 220.7 million members worldwide by mid-2022. They may be passing ships right now, but there’s more to this major milestone than you probably think. .
Netflix and accomplice
Where were you at the time Disney overtook Netflix in terms of raw subscriber count? Wednesday afternoon was important as a plot point, but it wasn’t exactly a plot twist. We need to get things framed properly before handing Mickey Mouse the keys to the kingdom. Disney+ didn’t turn on its high beams to begin with, zoom past Netflix and watch the streaming pioneer shrink in the rearview mirror.
Disney’s flagship service accounts for 152.1 million of the media giant’s total streaming accounts. It’s a ridiculously impressive feat for a platform that didn’t even exist three years ago, but it’s no match for Netflix over the years. The numbers include 22.8 million on ESPN+ and another 46.2 million on Hulu, two longer-running offerings that Disney doesn’t fully own but does have a majority stake.
It’s also important to note that Disney has been aggressively pushing its bundle offering all three services at a discounted price. There may be a small number of Netflix users with more than one account, but there is a lot of overlap with Disney’s 220.7 million, where each bundle customer counts as three different subscribers.
Let’s also talk about income. The most popular mid-tier plan on Netflix costs $15.49 per month. Disney+ right now is a little over half price at a monthly rate of $7.99. It doesn’t end there. More than a third of those subscribers are in India and pay an average of $1.20 a month for Disney+ Hotstar, a platform the House of Mouse acquired three years ago. Roll that back and the average subscriber is paying $6.29 per month, down from $7.99 as the service offers discounted annual plans and some members still take advantage of a three-year prepaid plan at a deeply discounted rate that was available on the platform. . Launching November 2019. Add Disney+ Hotstar back into the mix, and the average monthly revenue Disney is pulling in from its 152.1 million users is just $4.35.
ESPN+ is costing viewers an average of $4.55 a month despite its current monthly fee of $6.99 which will increase to $9.99 next week. Hulu costs more, and the 4 million cord cutters on Hulu + Live TV are paying much more, but it all adds up to almost $5.1 billion in revenue from all services combined, an impressive 19% year-over-year increase on the top line.
In the other corner, we have Netflix with revenue of $8 billion in the same three-month period, as well as a more modest 9% increase compared to the second quarter of last year. Disney is also nowhere near as we go through the income statement. Disney doesn’t expect to turn a profit with its direct-to-consumer business until fiscal 2024, posting an operating loss of nearly $1.1 billion for the segment. Netflix reported a $1.6 billion deal profit.
Is the torch, the relay race baton or the crown really going from Netflix to Disney? The momentum is going in that direction, but these ships haven’t crossed paths yet. Disney is in the process of drastically increasing its cover charges. It’s not just that ESPN+ goes up. There will be a turnover of people who will cringe at the 38% increase for ad-free Disney+. There should also be some billing coming in November, when people who prepaid for three years of Disney+ have to renew about triple what they paid for at the end of 2019. There’s no denying that Disney has become a major player in the streaming space, and a good portion of that growth has been organic. However, in almost every way (revenue, operating profit, customer share, and the actual number of unique subscribers), Netflix remains the lion king of the hill.
Better luck next term, Mufasa.
Rick Munarriz has positions at Netflix and Walt Disney. The Motley Fool has positions and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: $145 long calls in January 2024 at Walt Disney and $155 short calls in January 2024 at Walt Disney. The Motley Fool has a disclosure policy.