CFO: Disney’s Direct-to-Consumer Business to Up Q1 FY 2023 Revenue by $200 Million Despite Disney+ Hotstar Sub Decline

On the heels of a record operating loss in its direct-to-consumer business segment, Disney believes the worst is behind it as it readies the Dec. 8 launch of a less-expensive ($7.99) monthly ad-supported subscription plan, in addition to enacting price hikes on existing services.

The company will raise the price of its current ad-free option 38% to $10.99 ($109.99 annually), while the Disney bundle (Disney+, ESPN+ and Hulu) with ads will cost $13.99 monthly, and $19.99 monthly without ads.

Hulu with ads will remain priced at $7.99 per month, while Hulu without ads will still cost $14.99 per month. ESPN+ will remain at $9.99 month.

Disney CFO Christine McCarthy

On the Nov. 8 fiscal call, Disney CFO Christine McCarthy said the company’s new ad-supported streaming services would bow with 100 advertisers, but contribute little to the first quarter’s operating results, ending Dec. 31. That said, McCarthy believes the DTC’s peak fiscal losses are in the rearview mirror and that fiscal results should improve going forward.

“We expect DTC operating results to improve by at least $200 million [in the first fiscal quarter] compared to Q4 2022,” McCarthy said, adding the operating improvement in Q2 would be even higher.

“The prices should begin to modestly benefit [average revenue per subscriber] and subscription revenue in Q1,” she said, adding that the Disney+ price hike revenue gains wouldn’t begin to be realized until Q2.

“We don’t expect the launch of the ad-supported tier of Disney+ to provide a more meaningful fiscal impact until later [in the fiscal 2023] year,” McCarthy said, adding that while content costs will increase between Q4 and Q1 2023, marketing costs should decline to help offset that spending.

The executive believes Hulu and ESPN+ will continue to add subscribers in Q1, while core Disney+ subs will only increase slightly in Q1, reflecting tougher comparisons against Disney+ Day performance and the timing of content releases and promotions. McCarthy expects that trend to reverse in Q2 as new content is released in international markets.

“At Disney+ Hotstar, we are currently expecting subscribers will decline in Q1 due to the absence of the [Indian Premier League] cricket rights,” she said, adding that the company expects to see some subscriber stabilization in Q2.

Earlier this year, Paramount Global, through its Indian Viacom18 subsidiary, wrested exclusive streaming rights to the IPL from Disney for $3 billion.

Disney+ Hotstar remains the streaming platform’s largest (37.3%) subscriber base with more than 61 million subs out of 164.2 million worldwide.

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