Bob Chapek: Disney+ Eyeing Subscriber Headwinds in Q4

Disney+ has been an industry success since launching in November 2019, driving exponential subscriber growth past 116 million — surpassing SVOD sub growth market leader Netflix in the process. That ride is about to get bumpy in the fourth quarter (October to December), according to CEO Bob Chapek.

Speaking Sept. 21 at the virtual Goldman Sachs Communacopia Conference, Chapek said the explosive Disney+ subscriber growth has been driven in large part by Disney’s acquisition of the Hotstar streaming platform through its $71.3 billion 20th Century Fox purchase. A large segment of Hotstar subs follow professional cricket, specifically the Indian Premier League, to which the platform has exclusive streaming rights.

Disney also launched general content platform Star+ in Latin America, in addition to the Disney+ Hotstar rebranding in India. The Star+ rollout has seen its challenges with the platform having to adapt to 18 different markets, eight separate pay-TV distribution agreements in seven different currencies, across six different platforms, according to Chapek.

“That was quite ambitious,” he said. “It was a little slow going in the beginning as our partners mobilized. But at the same time, our trajectory is going to change very quickly, just like it did with Disney+.”

Separately, Chapek said the Sept. 19 re-launch of the the IPL underscores a shift in the league’s schedule and coincides with the annual expiration of many Disney+ subscriptions. Unlike in the U.S. and other markets, annual streaming subscriptions do not automatically renew. As a result, Disney has to re-engage millions of its streaming subs.

“Every time you lose that [sub], you have to get that [sub] back,” he said, adding that with the reboot of the IPL, there will lots of incentive among subs to renew.

“But you have to take a step back before you can take a step forward in terms of those [Indian] renewals,” Chapek said. “It’s a claw-back if you will.”

The executive used the subscriber situation in India to underscore what he contends is a significant “non-alignment” with Wall Street thinking on Disney+ SVOD subscriber growth. Chapek said growth is not linear quarter-to-quarter. He said Disney’s previous growth prediction of 230 million to 260 million subs led many analysts to project a required quarterly sub growth trajectory. Chapek said that thinking doesn’t reflect global reality.

“These [subscriber] numbers tend to be a lot noisier,” he said. “They are not a straight line relationship quarter-to-quarter.”

As a result, Chapek warned that Q4 sub growth would see a “low single-digit” increase compared with Q3. He added that the core sub market growth would increase both domestically and internationally.

“But we hit some headwinds,” he said, alluding to ongoing production shutdowns due to the pandemic. “This is a kink in the supply chain of new content coming onto the service. But this is very short-term.”

Indeed, Disney currently has 61 movies in production, in addition to 17 episodic shows earmarked for streaming, according to Chapek.

“We’re only in the first year-and-a-half of this wonderful experience of our direct-to-consumer business,” Chapek said. “We’re in inning one, and we have a lot to learn, but we’re really pleased how it’s gone [thus far].”

Leave a Reply

Your email address will not be published. Required fields are marked *

2 + 6 =

This site uses Akismet to reduce spam. Learn how your comment data is processed.