- Following its pandemic heyday, Disney+ experienced a deceleration in new subscriber growth in Q4 2021. A continuation of this trend in its latest earnings release will stoke investors’ concerns.
- Disney+’s expansion into emerging markets will provide a boost but may not be enough to sustain its previous subscriber growth as lockdowns become less common globally.
- As a long-term strategy, streaming companies should look to the metaverse to provide a superior user experience and protect against churn.
The pandemic provided a significant boost to Disney’s video streaming platform, as it quickly surpassed the 100 million subscriber mark less than 18 months after its launch. However, with the platform recently experiencing a slowdown, adding just 2.1 million subscribers in Q4 2021, investors will now be watching for signs of this continuing in Disney’s latest earnings release says GlobalData, the leading data and analytics company.
Francesca Gregory, Associate Analyst at GlobalData, comments: “Like many pandemic high-flyers, Disney+’s rapid growth was driven by extreme circumstances, which started to peter out at the end of 2021. Streaming companies have raised expectations by regularly surpassing their own ambitious targets and now must continue performing exceptionally just to meet investors’ expectations. The price of failure was demonstrated by the fall-out from Netflix’s narrow miss on subscriber targets last month, which caused share prices to slide across the subscription video on demand (SVoD) market.”
Disney’s streaming proposition provided a valuable offset to the pandemic’s financial impact on its parks and experience offerings. As a result, the company pursued an aggressive strategy with Disney+, using Amazon Web Services (AWS) to support expansion into numerous international markets.
Gregory continues: “Disney has rightly recognized the importance of emerging economies and moved quickly to secure its market position. For example, GlobalData’s SVoD database indicates that Disney+ Hotstar currently holds a 57% market share in India.
“Although subscriptions from emerging markets will go some way to boosting subscribers, India’s SVoD market is currently much smaller than its US counterpart (90 million subscribers versus 318 million subscribers). According to GlobalData forecasts, this will remain the case until at least 2026. Additionally, lower subscription rates in emerging economies mean that additions in these regions do not guarantee growth in revenues. Even if it were a case of simply counting subscribers, Disney+’s globalization might still fail to protect the company from the subscriber slump currently sweeping the industry.”
As countries continue to shift away from prolonged lockdowns, streaming platforms will find themselves operating in a new landscape that demands innovation to drive growth in subscribers. Many streaming platforms have focused on diversifying their content. In March, Disney+ will cater to a range of audiences with the release of both coming of age animated film ‘Turning Red’ and drama series ‘The Dropout’. However, Disney should extend this diversification to its user experience in the long term by capitalizing on concepts like the metaverse.
Gregory adds: “Putting questions of regulation, price, and weighty headsets aside, this emerging concept could provide an unparalleled and immersive streaming experience. It would also allow Disney to emphasize the escapism inherent in other aspects of its business. Netflix gained significant first-mover advantage in SVoD due to its superior user experience, but streaming companies that invest in emerging technologies such as virtual and augmented reality will stand to gain in the future.”
