Why Disney+ Proves the Streaming Bundle Works

Possibly more impressive than the 28.6 million subscribers Disney+ has reeled in since its November launch has been the service’s ability to boost the company’s other streaming platforms — ESPN+ and Hulu — through bundling the services together. On Tuesday, Disney announced that in addition to the nearly 29 million Disney+ subscribers — which surpassed analysts’ expectations for 25 million subscribers — Hulu saw paid subscribers increase more than 30% to 30.7 million. ESPN+ more than doubled its paid subscriber count year-over-year, posting 7.6 million subscribers, up from 1.4 million during the same fiscal first-quarter period a year ago. A rising tide lifts all boats. During Disney’s quarterly conference call during which he laid out the subscriber growth, CEO Bob Iger also applauded the company’s ability to shift its strategic focus and have such success in the streaming landscape. “It’s an impressive quarterly report from Disney in the company’s first report since launching its eponymous streaming service,” said Haris Anwar, an analyst at financial markets platform Investing.com. “It’s not only succeeding in attracting more subscribers to its Disney+ app, but also ensuring strong momentum from its legacy businesses. It’s a winning combination and more importantly, it proves the company has a solid strategy to build a competitive streaming video product which can challenge its rivals, including the incumbent Netflix.” Disney announced back in August that it planned to bundle its then-forthcoming Disney+ service with its middling ESPN+ platform and Hulu. Together, the three services cost subscribers $12.99 per month, saving viewers $5 per month compared to paying for the services à la carte. And, importantly, the bundle costs the same as Netflix’s standard subscription. “I think what they just announced is the best value in America,” John Landgraf, CEO of FX, which is owned by Disney, told TheWrap at the time. ESPN+ has been a relatively niche service. The app gives sports enthusiasts thousands of live games from MLB, MLS, NHL, soccer from England, Germany and Italy, and college football and basketball games from the Big 12 and more than a dozen mid-major conferences like the Sun Belt and Ivy League. ESPN signed a major rights deal with the UFC in 2018 that makes ESPN+ the main host for fights. ESPN+ also offers users access to its “30 for 30” documentary series archive and exclusive shows like episodes of Kobe Bryant’s basketball breakdown show “Detail,” and Peyton Manning’s “Peyton’s Places” and the revived “NFL Primetime.” But what you won’t find on ESPN+ are events like the College Football National Championship, “Monday Night Football” or the NBA Finals. The lack of big-ticket live sports hampers ESPN’s ability to create a truly robust offering that’s on par with Disney+, which has brought brands like Marvel, Pixar and Star Wars under one roof. But bundling them all together makes for a much more attractive prospect. It wasn’t all roses for ESPN+ and Disney, however. Overall, Disney’s direct-to-consumer and international business — which houses Disney+, ESPN+ and Hulu — saw operating losses widen to $693 million from $136 million during the same period a year ago. Though the loss is significant, Disney had warned investors that it was expecting losses as it invested more in streaming and got Disney+ off the ground. “The increase in operating loss was due to costs associated with the launch of Disney+, the consolidation of Hulu and a higher loss at ESPN+,” the company said in its earnings release. “The increase in operating loss at ESPN+ was primarily due to higher programming costs, primarily for Ultimate Fighting Championship (UFC) rights, and an increase in marketing spend, partially offset by subscriber revenue growth and UFC pay-per-view fees.” Disney management has said they expect the streaming business to turn a profit in 2024, as Disney+ is project to hit 60-90 million global subscribers. During its fiscal first quarter, Disney reported $20.86 billion in revenue, edging past analyst estimates of $20.79 billion, and earnings per share of $1.53, which excluded certain items that affected comparability to prior quarters, which surpassed projections of $1.44 per-share earnings. “We had a strong first quarter, highlighted by the launch of Disney+, which has exceeded even our greatest expectations,” Iger said in a statement. “Thanks to our incredible collection of brands, outstanding content from our creative engines and state-of-the-art technology, we believe our direct-to-consumer services, including Disney+, ESPN+ and Hulu, position us well for continued growth in today’s dynamic media environment.” Tim Baysinger contributed to this report.