Streaming
Cheaper advertising subscription brings Disney more growth
The Disney logo, taken in Manhattan: Disney’s fourth fiscal quarter ends. photo
© Michael Kappeler/dpa
Streaming services offer cheaper subscriptions with ads while increasing prices for ad-free versions. That could have consequences for the TV landscape.
In the video streaming business, cheaper subscription models with advertising are gaining momentum. At the entertainment giant More than half of Disney’s new customers opted for it last quarter. The trend could accelerate the redistribution of advertising spending away from traditional linear television and thus transform the TV landscape.
The Disney Group, which has both a streaming service and a traditional TV business, is on the one hand driving the change – but also has to digest the consequences. This influences which films and series the Hollywood giant will produce in the coming years – and for how much money.
112.6 million customers
Worldwide, the number of Disney+ users with advertising subscriptions rose by around 2 million to 5.2 million. The big streaming rival Netflix recently had 15 million advertising subscriptions.
Overall, the number of customers in the Disney+ core brand grew by 7 million to 112.6 million, as CEO Bob Iger said when presenting quarterly figures after the US stock market closed. However, Disney still has a streaming business in India and has previously marketed the Hulu platform, whose program is integrated into the app in Germany, individually in the USA.
High losses before
Disney has invested a lot of money in expanding its streaming service in recent years and the losses in the business add up to more than ten billion dollars. There was a further improvement in the last quarter: the division was operationally in the red of $387 million (361 million euros).
In the same quarter last year, the area had lost $1.47 billion. Disney reiterated its goal of stopping streaming losses at the end of the current fiscal year in September 2024. Iger wants to shoot, among other things, less expensive “Marvel” and “Star Wars” series.
The company leader, who has returned from retirement, is also putting the brakes on costs overall. Iger now wants to reduce annual costs by $7.5 billion. The previous savings target was $5.5 billion. Disney was recently targeted again by the aggressive investor Nelson Peltz, who wants to have more influence on Disney’s strategy.
What’s next?
In the fiscal year that has just begun, the group will spend a total of around $25 billion on content production, said acting CFO Kevin Lansberry in a conference call. That would be around two billion dollars less than in the last financial year – in which spending was already slowed by the months-long strikes by screenwriters and actors.
Disney was originally expected to spend more than $30 billion. After the agreement with the authors, a deal with the actors is now in the offing, so that TV and film productions should start again soon.
Disney used to be able to rely on the traditional television business in the USA with channels like ABC to reliably bring money into its coffers for streaming expansion. But now many Americans are canceling their expensive cable contracts and advertising money is moving away from linear television.
Sales in Disney’s TV division fell by nine percent year-on-year to $2.6 billion and operating profit stagnated at $805 million. The streaming business is much larger at a good five billion dollars.
At the same time, Disney boss Bob Iger made it clear that he saw no pressure to exit the traditional television business. They have also found ways to reduce costs there, said Iger on CNBC. Business is going better than expected. People are also aware of how valuable the channels and their programs are for Disney’s streaming offerings. After Iger said in the summer that he could imagine Disney without linear television, the first offers to buy the company began to arrive.
However, Iger reiterated that he sees four central pillars for Disney’s future: streaming, theme parks, movies and the sports channel ESPN. So far, ESPN has been an important moneymaker for Disney in the cable business, and Iger wants to start an ESPN streaming offer in 2025.
Disney increased group sales in the fourth quarter ended September by five percent to $21.24 billion. Profits rose from $254 to $694 million.