Disney passes Netflix in the streaming wars, but there are two catches

Disney has overtaken Netflix in the global race for streaming subscribers. But there is a catch. Actually, there are many catches.

The key figure is that Disney as an entertainment megalith now has 221.1 million subscriptions to 220.6 million Netflix accounts.

While it appears that Disney has surpassed Netflix in the streaming wars, the 221.1 million figure is a combined figure for Disney+ subscribers and US services Hulu and ESPN. Netflix only has one brand so this is not a make-believe comparison.

Of that number, Disney+, which launched in late 2019, has amassed 152.1 million subscribers worldwide. It increased its membership by 14.4 million subscribers, more than the estimated 10 million.

It captured number one in the Disney versus Netflix narrative.

A more revealing asterisk appears when you drill down the numbers around average revenue per user (ARPU), as an industry publication Variation have done.

ARPU is an important measure for this type of finance because it reflects how much each customer is worth to the business. The higher the ARPU, the more money each customer spends with the business.

Based on Variation, Disney’s ARPU in the US and Canada is $US6.27 per subscriber per month compared to Netflix’s $US15.95 for the same region. Disney subscription prices in the US and Canada are much lower than Netflix.

The ARPU difference is even more stark in India and Southeast Asia where Disney only earns $1.20 per month compared to Netflix’s $US8.83 in APAC.

While it may seem like ARPU is something investors and money care about, in the end it will affect the audience.

In an effort to increase that ARPU, there is currently a lot of movement around pricing.

Disney has announced US prices for Disney+ will increase by 38 percent in December, from $US7.99 to $US10.99 per month, along with the introduction of an ad-supported membership tier that will cost $US7.99.

Disney+ will launch an ad-supported option globally in 2023.

In Australia, Disney+ is priced at $11.99 per month. It launched at $8.99 per month but raised costs in February 2021 when it added the Star sub-brand to its platform.

Locally, Star hosts Disney’s more adult-oriented programming and includes many films and shows exclusive to Hulu in the US. This includes series like drunk, We’re Destroyed and the upcoming critical sensation Bear.

Netflix will also introduce ad-supported membership tiers starting in 2023.

Netflix has previously avoided introducing ads on its platform with co-chief executive and co-founder Reed Hastings dismissing the idea.

The company made a change in April when it revealed for the first time in a decade that it was backtracking in the number of its subscriptions.

The ad-supported tier is one of the two main tactics Netflix uses to contain its declining membership. Cheaper subscription options can appeal to existing and potential customers who are feeling the pressures of the global economy and inflation.

And advertising revenue from brands can increase Netflix and Disney ARPU.

Another step for Netflix to increase its subscriber base is to crack down on passwords, a common practice that violates its terms and conditions but is practiced by its 100 million subscribers.

Netflix is ​​piloting two forms of the crackdown in smaller regions of Latin America, both of which mean charging subscribers extra for sharing their login details outside of where they live.

The American streaming market is going through a turbulent period due to increased competition and economic conditions.

Earlier this month, Warner Bros. Discovery announced it would merge its two streaming services, HBO Max and Discovery+ after the merger. The move by Warner Bros. Discovery could signal a long-awaited consolidation by many in the industry that has been marked for some time.

In Australia, there are more than a dozen paid streaming platforms, ranging from broad appeal brands like Binge*, Netflix, Stan and Amazon Prime Video to specialty products like Shudder, Hayu and Shelter.

According to Roy Morgan data published in February, 74.5 per cent of Australians accessed subscription video-on-demand platforms in an average of four weeks in the three months to December 2021, an increase of 2.5 per cent.

The most popular service remains Netflix, followed by Foxtel Group*, which owns Foxtel, Binge, Kayo, and Flash.

Roy Morgan estimates Australians use an average of 2.7 subscription video-on-demand services, up from 1.8 the previous year.

*Foxtel Group is majority owned by News Corp, the publisher of this website

Originally published as Disney passes Netflix in the streaming wars, but there are two catches

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