Disney reported its fiscal Q3 ‘24 results, including its first-ever profit in its DTC segment. But we’re skeptical of the true quality and sustainability of the profit.
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Questions about Disney subscriber numbers (10:00)
Disney says it had a 19% increase in US and Canadian subscribers over the last year. However, other data suggests that most subscriber gains came from a wholesale deal with Charter, which added 8 million subscribers in the first calendar quarter. Data from Lightshed suggests most of those have not activated their subscription.
Questions about revenue and profitability of DTC services (18:40)
Disney says that direct-to-consumer services achieved profitability for the first time in the quarter. We decompose the numbers to understand how Disney made the claim. ESPN+ is crucial to the profitability claim, and Disney provides scant data on how it did. After some analysis of the number, we are skeptical that DTC profitability is durable.
The bundling strategy also discounts the constituent services by as much as 35%. Bundles have benefits, but they certainly aren’t enablers of ARPU growth!
Disney is introducing another round of price increases in September (27:30)
Disney is increasing the price of all standalone services and bundles except for the Disney Duo Premium. With the company about to introduce password-sharing curbs, an increase of 25% in the lowest-cost subscription plan does not seem a good idea and deviates from the Netflix approach to paid sharing, which has worked so well.
Disney’s strategy with Venu Sports doesn’t make sense (31:00)
No comment on the possibility Disney still owes Comcast $5B to close out the Hulu deal (32:50)
