Wednesday, February 5, 2020, 11:49 AM ET|Posted by Will Richmond
Back on November 13th, the day that Disney+ launched, I wrote, “Disney+ is a Winner.” I went on to describe my first experiences with the new service - the seamless sign-up process, extensive content, impressive UX (modeled mainly on best practices gleaned from other streaming services like Netflix), ability to download content for mobile use, etc.
My main takeaway then was: “Disney+ is a winner. Period. End of story. It will have millions of subscribers by the end of this holiday season, and a multiple of that a year from now. As international markets roll out, the millions will multiply again, many times.” In other words - although I’ll be the first to say that there are no guarantees with anything in life - Disney+, with its ridiculously low $7/mo price (and free for certain Verizon Wireless subscribers) - looked as close to a sure thing as I’d seen in a long, long time.
With Disney’s fiscal first quarter earnings report yesterday, it became official, Disney+ IS a winner. Period. End of Story. Disney reported having 26.5 million subscribers at the quarter’s end, Dec. 28th in the U.S and Canada. Since then Disney+ has gained another 2.1 million subscribers to be at 28.6 million as of this past Monday, Feb. 3rd.
Disney said that 50% of signups came from Disneyplus.com, 20% through the partnership with Verizon and the rest through other sources (e.g. iTunes, etc.) ARPU on the Q1 sub base was $5.56/mo, or 80% of full retail of $6.99/mo, which feels like a pretty solid starting point. Disney said that both conversion from free trial to paid status and churn were both better than expected, though no further details were provided.
All of this is of course U.S. and Canada only. Disney confirmed that the big international rollout will begin on March 24 in the U.K., Ireland, France, Germany, Spain, Italy, Switzerland and Austria - one week earlier than initially planned. Later in the summer Disney+ will launch in Belgium, the Nordics and Portugal. And on March 29th Disney+ will launch in India with Hotstar. In other words, 2020 will be the beginning of the Disney+ international onslaught.
I thought it would be interesting to put Disney+’s U.S. and Canada subscriber growth into a little bit of context relative to Netflix. From launch day of Nov. 12th through Dec. 28th there were 47 days and 26.5 million subscribers were added in that period. So straight average subscriber growth was almost 564K/day. But Disney said that 10 million of the adds occurred by the end of launch day. So deducting those leaves about 16.5 million added over 46 days, or 359K per day.
Disney said as of this past Monday, it had 28.6 million subscribers, meaning it added 2.1 million subscribers in the past 37 days (31 of which were in January), or 56.8K per day. Admittedly the post-holiday January period is hardly any honest person’s month to extrapolate from, but just to think out loud, if Disney+ added 56.8K subs/day, then it added around 1.7 million in January. Multiply by 3 months and Disney+ would add about 5.1 million subs in the Jan-March period - in the U.S. and Canada only.
By comparison, in Q1 ’19, Netflix added 1.74 million paid subscribers in the U.S., in Q1 ’18, it added 2.28 million, in Q1 ’17 it added 1.42 million, in Q1 ’16 it added 2.23 million, in Q1 ’15 it added 2.28 million and in Q1 ’14 it added 2.25 million. So that means if Disney+ were to add 5.1 million subscribers in the U.S. and Canada in the Jan-Mar period it would be more than double the best Q1 sub additions Netflix has had in the past 5 years.
Now I can hear readers voicing their caveats: Disney+ is a brand new service starting from a base of zero (btw, Netflix had around 32 million U.S. subscribers at the end of 2017), Disney spent lavishly on marketing/promotions, Disney content is unrivaled, etc. Yes to all of those. Still an interesting comparison though.
For me the most compelling thing about yesterday’s earnings is that they prove the extent to which the aircraft carrier that is Disney was able to pivot so thoroughly over such a short period of time and set itself up for the kind of growth I outlined above - with barely a blip. Talk about execution excellence. The Disney+ launch is destined to become a top-selling Harvard Business School case study that every top executive at every company in the world - regardless of their industry - is going to want to read.
Understanding how CEO Bob Iger came to the decision to almost completely disrupt Disney’s existing business model with Disney+, make a series of multibillion dollar acquisitions, invest in critical technology/infrastructure, message all of this to Wall Street and then successfully launch a new streaming service at such massive scale has to be considered among the most interesting stories of recent times.
Disney+ is already a winner and is only going to become a bigger one in future years. The amount of preparation and execution that went into making this happen is staggering.