Disney+ overtakes Netflix, but must adapt to a saturated market

It took five years for Disney to overtake Netflix. The communications giant announced on Wednesday evening that it had attracted 221 million subscribers to all of its video-on-demand platforms (Disney +, Hulu and ESPN). Netflix, pioneer ofstreaming“, indicated last month to have recruited a total of 220.7 million subscribers. It is an important symbolic victory which, however, hides costly challenges ahead. Disney is indeed revising several growth objectives downwards, changing its prices and its offer.

The huge bet announced by Bob Iger, boss of Disney in 2017, has been successful: the switchover of the audience of his films, series and television channels to his services in “streamingoccurs roughly as the direction of the firm of Burbank (California) envisioned. The great threat that Netflix posed to traditional ways of distributing its productions has been effectively countered.

North American market saturation

In the last quarter, Disney+ brought in 14.4 million new subscribers, well above analysts’ forecasts. However, the transformation of Disney into a leader in the “streamingis not yet financially profitable. This activity caused it to lose another $1.1 billion in the last quarter. Last year during the same period, the losses were only 293 million. The profitability target in 2024 is however confirmed by the group’s financial director who presented Disney’s performance from April to June on Wednesday evening.

As in the case of Netflix, growth in video on demand is essentially international. The signs of saturation of the North American market are multiplying, which poses a problem for other studios like Warner Bros. Discovery, NBCUniversal and Paramount, for example, which decided somewhat late to follow Disney’s strategy.

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The latter thinks he has a sufficient catalog and essential franchises such as “Star Wars» and the superheroes of «Marvelto further develop the new Disney+ empire. It is clear, however, that the costs associated with its international deployment as well as the congestion of the market complicate its strategy. Christine McCarthy, Disney’s chief financial officer, is forced to revise downwards the subscriber recruitment projections still validated this winter by Bob Chapek, the group’s boss, successor to Bob Iger. Now Disney + is aiming for between 215 and 245 million customers by September 2024. The target of 230 to 260 million has been abandoned. The loss of rights to broadcast cket matches, which is very important for the Indian market, partly explains this adjustment.

Offer with advertising

Disney’s spending on new content is also revised downward for fiscal year 2022. It will drop from $32 billion to $30 billion. Importantly, Disney+ prices are also changing, as inflation pushes millions of households to revise their entertainment budgets. On the one hand, the subscription to the service of “streamingad-free will climb 38% in December. It will fetch $10.99 per month in the US, which is still lower than Netflix’s equivalent offering. On the other hand, a new service, punctuated with advertising, will be offered at 7.99 dollars. This last option aims to preserve less well-off customers. Netflix, which is now working on the launch of a new, cheaper service, but partly financed by advertising, will have to adjust to this new configuration.

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Fortunately Disney can once again count on its theme parks to ensure its prosperity. The end of the pandemic and the return of crowds to Disneyland located around the world, boosted its results. The quarterly turnover of this most profitable division of the group jumped 26% to reach 21.5 billion dollars. The profits generated by this activity, which Bob Chapek was responsible for before his appointment as number one, took off by 50% to reach 3.6 billion dollars.

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