Disney's flagship direct-to-consumer business has doubled the size of its subscriber base in one year, from 57.5 million to 116 million, the company revealed in its fiscal third quarter results.
Chief executive Bob Chapek told investors the business is "extremely pleased with the continuing success" of its portfolio of streaming services, which now count a total of nearly 174 million subscribers across Disney+, ESPN+ and Hulu.
For its third fiscal quarter ended July 3, 2021, direct-to-consumer revenues increased 57% to US$4.3 billion. However, the division continues to operate at a loss. In the quarter it posted an operating loss of $293 million, although this is down from around $600 million the prior year.
Disney said the decrease in operating loss was due to improved subscription and advertising revenue at Hulu, partially offset by a larger loss at Disney+ due to higher programming, production, marketing and technology costs driven by the ongoing expansion of the service.
While Disney said subscription revenue for Disney+ increased, the average monthly revenue per paid subscriber decreased by 10% from a year ago to $4.16 in the quarter. The company attributed this to a higher mix of Disney+ Hotstar subscribers in the quarter. India now makes up nearly 40% of all subscriptions, as of the end of the third quarter. Excluding Disney+ Hotstar, the average monthly revenue per paid subscriber was $6.12, an increase of about $0.50 versus the second quarter, the company said.
Christine McCarthy, SVP and chief financial officer, said on the investor call: "In this third quarter, when you exclude Disney+ Hotstar, we saw solid sub growth quarter-over-quarter [with] net adds consistent with what we saw in the previous quarter. So we feel really good about the continued growth in our core markets."
Chapek attributed subscriber growth in its core markets to film and TV launches such as Pixar's Luca and Marvel's Loki and the Falcon and the Winter Soldier. The service also continues to roll out to new markets, including Disney+ Hotstar in Malaysia and Thailand in Q3.
He announced that Disney+ will launch in South Korea, Hong Kong and Taiwan in November 2021. Disney+ Japan will also be expanded to feature additional general entertainment content in October 2021, following its soft launch last year.
The launch of Disney+ in Eastern Europe has moved from late 2021 to summer of 2022 to allow for an expanded footprint that will include parts of the Middle East and South Africa, the company said.
The streaming service has launched in 61 countries worldwide in less than two years.
Elsewhere, Hulu "exceeded expectations" and was profitable in the quarter. The streaming service ended the third quarter with 42.8 million paid subscribers, up from 41.6 million in Q2, inclusive of the Hulu Live digital MVPD service.
The increase at Hulu was due to subscription revenue growth and higher advertising revenue, partially offset by an increase in programming and production costs, the company said.
McCarthy said the lift in advertising revenue is coming from higher sell-through rates, addressable advertising and a significant ramp-up in the dynamic ad insertion technology it has within Hulu Live.
ESPN+ grew subscribers by 75% year-on-year to 14.9 million. In total, Disney posted $17 billion in revenue and net income of $923 million in the quarter, with sales up 45% from a year ago.