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Subscription video a bright spot for Disney as physical business verticals struggle

Disney+ has amassed 73.7 million subscribers, vastly exceeding its initial expectations. This growth came as theme parks, rides, and cruise businesses suffered enormously for the company, which posted its first annual loss in 40 years. The company re-structured recently with a focus on streaming, and that seems to be paying off. Around three-fourths of Disney+ subscribers pay the company an average of US$5.30, the Walt Disney Company’s CFO Christine McCarthy said in an earnings call.

  • Over 18 million India subscriptions: Disney+ Hotstar has over 18 million subscriptions, McCarthy indicated. Monthly ARPU from Hotstar has increased more than threefold to around ₹160, according to an analysis of the numbers provided by Disney. This translates to US$39.24 million monthly revenue from Hotstar.
  • Disney has a “deep bench” in India: Asked about Star India chief Uday Shankar’s departure, Disney CEO Bob Chapek said, “In terms of India, obviously, we have an executive there, Uday Shankar, who we love, and we wish him well. He gave us some indication several months ago that he was thinking of moving on. We’ve got a really deep bench there.” As for Hotstar’s performance, McCarthy refused to go into detail (though a lot was implied clearly), saying, “[As for] the comments that I gave on the Hotstar Disney+ India subs, we just don’t comment on those economics.”
  • PVOD strategy “promising”: Due to theatre closures, the film Mulan was released on Disney+ first as a transactional video-on-demand title, requiring separate payment from the subscription fee. Chapek said, “Unfortunately, that title met with some controversy, both in the U.S. and internationally, shortly after we released it. But we saw enough very positive results before that controversy started to know that we’ve got something here in terms of the premier access [Premium VOD] strategy.”
  • Operating losses better than last year: While Disney’s had huge success with its Disney+ rollout, the service is not yet profitable — the price is low, and marketing costs are high. “At Direct-to-Consumer & International, an operating loss of $580 million in the quarter was an improvement of approximately $170 million compared to the prior year. This improvement was driven by higher results at Hulu and ESPN+, partially offset by costs associated with the ongoing rollout of Disney+ and a decrease at our international channels,” McCarthy said.

Q4-FY20 Disney (ended October 3, 2020)

Revenue: US$14.7 billion (down 23% YoY)
Net loss from continuing operations: US$710 million (as against a US$777 million net income in the same quarter last year)
Free cash flow: US$938 million (up 129% YoY)

Results and Press Release | Transcript of Earnings Call

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