Disney+ global subscriber estimates, year-end 2022

Combined subscribers across Walt Disney Co.'s Disney+ and Disney+ Hotstar services rose 24.6% on an annual basis in 2022 to hit 161.8 million paid subscribers. The well-known Disney brand, tie-ins to popular franchises such as "Star Wars" and "Marvel" and heavy spending on content and programming have helped Disney+ gain traction in major subscription video markets around the world.

– Disney+ growth continued in 2022 even as its primary rival Netflix Inc. stumbled slightly in the first half of the year. 2023 could be more challenging for Disney, however, with tough macroeconomic conditions persisting and its Disney+ Hotstar subscriber base under pressure with the loss of streaming rights for the Indian Premier League (IPL).

– Layoffs and the scaling back of some content spend could ripple down to Disney+ as Disney focuses on streaming profitability over scale. Disney has spent heavily on local programming to compete and add new subs in numerous markets around the world, but the company could be forced to be choosier moving forward.

– The launch of an ad-supported Disney+ tier in the US in late 2022 had no material impact on 2022 results but could help sustain subscriber growth in the US as well as any other international markets it launches in. The ad tier could also boost average revenue per user if Disney follows the same strategy it did in the US of increasing the price of its ad-free tier in conjunction with the debut of the ad-supported option.

Disney+ and Disney+ Hotstar subscribers have swelled rapidly since respective launches in the fourth quarter of 2019 and the second quarter of 2020, with only a single quarter in the fourth quarter of 2022 when combined subs contracted on a sequential basis. Despite a small decline in that quarter due to Disney+ Hotstar losses, annual gains have consistently remained strong across North America, Europe, Asia-Pacific and Latin America.

Disney's success in rapidly scaling Disney+'s global paid subscriber base has relied heavily on launching at a relatively low price point in many markets, offering discounted bundles of Disney-owned streaming services and entering into distribution deals with telco and pay TV partners. While each of those efforts can speed up subscriber gains, they also typically depress the average monthly revenue generated by each user (ARPU). Disney+ pricing began to creep up in some markets in 2021 and 2022 but ARPUs for both Disney+ and Disney+ Hotstar ended 2022 at levels roughly equal to those seen in late 2020 and early 2021.

A push toward profitability and focus on improving ARPUs could see more price bumps in 2023, especially in markets where Disney makes its ad-supported tier available. Like other US-based streamers, Disney's reported results were impacted by a strong dollar in 2022, and currency fluctuations versus prior years did depress some metrics such as reported revenues and ARPUs.

Disney's reported annual cash spend on programming for its main streaming services highlights the priority the company has placed on bulking up Disney+'s library of original and acquired programming. Disney+'s $5.79 billion in programming and production costs in 2022 was up 74.3% versus the prior year and accounted for 38% of Disney's programming spend across its primary streaming offerings.

If the company significantly reins in content spend at Disney+, subscriber growth in 2023 could become more challenging as consumers compare Disney+'s smaller content library against those offered by some other rivals such as Netflix and Amazon.com Inc.

US and Canada

Growth in US and Canadian markets in 2022 was more modest for Disney+ versus other markets but the US still plays a vital role in the service's success and accounts for about 40% of total subscribers for Disney+ (excluding Disney+ Hotstar subscribers.)

Disney's ability to bundle together access to Disney+, Hulu and ESPN+ at a discounted price has been a key driver to gains for Disney+ in the US. Disney noted in its earnings call for the third quarter of 2022 that bundled and multiproduct offerings accounted for over 40% of domestic Disney+ subscriptions and that its bundles typically drive higher long-term subscriber value by reducing churn. Disney has also maintained a long-term partnership with Verizon Communications Inc. that allows select Verizon customers to get free access to Disney+, Hulu and ESPN+ as part of their mobile plans.

Disney+ subscribers in Canada and the US saw 2021 price increases that bumped up the monthly costs by about 33% and 14%, respectively, while some US subscribers experienced another price hike in 2022 with the debut of the Disney+ ad-supported tier in December. The Disney+ ad-supported tier was priced at $7.99/month, with the ad-free service increasing in cost from $7.99/month to $10.99/month. The base bundle of Disney+/Hulu/ESPN+ also increased in price at the same time from $13.99/month to $14.99/month. Increasing ARPUs in the US will be critical in Disney's push toward streaming profits, but the company must wrestle with a very competitive streaming market and a subscriber base that has already endured a series of recent price hikes.

Europe

In 2022, Disney added over 4 million paid subscribers in Europe growing annually at a rate of 23.6%. At the end of the year, the service ranked third in subscribers in Europe behind Netflix and Amazon with a market share of just over 11%. Its adoption varies across regions and is relative to the strength of competition as well as to cultural and economic factors.

Consumers in the Netherlands were the first in Europe to gain access to Disney+ back in 2019 and almost two years later the service was behind a fifth of the Dutch subscription video-on-demand (SVOD) subscriptions. The high percentage of an English-speaking population and a positive attitude towards streaming were key factors behind its success. Since launching, its library has grown by 2.5 times with Disney committing to its first local original crime-drama series "Nemesis."

Disney has also found relative success in the UK, a territory known for its high levels of SVOD penetration and large number of paid services per household. In Germany, Austria and Switzerland, Disney+ closely matches the European average with just under 12% market share. The early adoption of Netflix and Prime Video, especially in Germany, coupled with an array of offerings from local players that follow the hybrid subscription/ad-tier model and a strong free-to-air linear TV sector, has not left much room for new entrants such as Disney+ to expand their reach. Similarly, Disney+ underperformed compared to the European average in the Nordics, facing intense competition from the likes of Netflix, Warner Bros. Discovery Inc.'s HBO Max and Viaplay.

Last year, Disney announced that more than 60 European originals will be released by 2024 and will remain exclusive to Disney+ with titles from Europe, the Middle East and Africa also available on Hulu in the US. With profit margins under pressure, the strategy that relies on exclusivity might be shifting towards co-productions and third-party licensing as indicated by CEO Bob Iger's recent announcement of $3 billion in programming budget cuts over a two-year period.

With the cost of programming on the rise as part of the high inflation rates observed in most Western economies, streamers often resort to various measures such as raising prices, incorporating advertising and limiting churn by offering annual discounted plans. Competition from other SVOD providers as well as the rise of free, ad-supported TV services has held Disney back from hiking prices again, after an increase of 30% in the first quarter of 2021, fearing a rise in churn. With an ad-tier subscription plan scheduled to arrive in Europe in 2023, Kagan expects the Burbank, Calif., based group to proceed with another 25% hike.

Asia-Pacific

Disney's streaming subscriptions in the Asia-Pacific region added up to 68.8 million as of year-end 2022, accounting for over 40% share of the company's total subscriber base. Faster growth was observed in newer markets including South Korea, Hong Kong, Thailand and Malaysia, where a Disney streaming service was introduced in 2021 and promoted through bundling with incumbent telco providers. India and Indonesia, operated under the Disney+ Hotstar brand, remain the two largest markets followed by Australia and Japan.

Its low-cost strategy contributes greatly to Disney's rapid growth in the region but has also resulted in a relatively low average revenue per subscription (ARPS). Disney+ Hotstar ARPS, reported at 74 cents in the final quarter of 2022, has always dragged down the company's total ARPS. While pricing remains fairly affordable, the streamer attempts to improve profitability through cost cutting. The first major attempt was to withdraw from the bid for IPL matches in June 2022. The impact of the decision appears to be less alarming than it had seemed as subscription decline, recorded for the first time in the fourth quarter of 2022, is estimated at 7.9% and was compensated by growth accumulated in the first three quarters. Further efforts were made recently with the termination of the carriage of Formula 1 races and HBO content on Disney+ Hotstar. More content could be dropped to be in line with Disney CEO Bob Iger's plans to trim programming budgets.

Disney extended its streaming presence in Asia-Pacific with the rollout of a new service in the Philippines in November 2022. Vietnam is the only major market in the region without a Disney streaming service. The company has not yet announced plans to launch in the market. Disney has also not indicated a date for the launch of its ad-supported tier in the region.

Notably, launching Disney+ in the Philippines diverged from Disney's usual playbook of using the Disney+ Hotstar brand that carries more affordable subscription fees in emerging Southeast Asian markets. However, the streaming service in the Philippines was the first Disney+ version to offer a mobile-only subscription plan, which is nearly 57% cheaper than the monthly Premium plan with access on more supported devices. An annual option is also available for the mobile-only plan and provides subscribers with a discount of almost 40% over the monthly option. Disney+ Hotstar in India is the only other Disney streaming platform in the region that offers a mobile-only subscription plan.

While Disney maintains an affordable pricing strategy in emerging Asia-Pacific markets, the company seems more willing to hike fees in other affluent markets like Australia and New Zealand, where Disney+ has been available since 2019. Following a price hike in 2021 upon the launch of the Star content hub on the platform, Disney+ once again raised rates for both its monthly and annual subscription plans in Australia by 17% and in New Zealand by 15% before the end of 2022. The company has maintained the same pricing in other Asia-Pacific markets but could hike rates given its established presence in these markets.

Latin America

Disney+ launched across most of Latin America in the fourth quarter of 2020, pairing up Disney's trove of content with more than 70 local original series available or in progress that were produced in Brazil, Mexico, Argentina and Colombia. Diverging slightly from its strategy in other international regions, Disney chose to launch Star+ as a stand-alone service in Latin America in the third quarter of 2021, packaging together local programming, international content and live sports. Disney+ and Star+ are also available as a Combo+ bundle; please note that Disney counts Star+ subscribers as Disney+ subs in its reported totals as do our estimates below.

While Netflix is the clear leader in the streaming race in Latin America, competition is intense between the various services offered by big US streaming operators including Amazon, Disney, Netflix, Paramount Global and Warner Bros. Discovery, as well as from local offerings such as Globo Comunicação e Participações S.A.'s Globoplay. Disney's access to sports programming via ESPN could help it differentiate its streaming offerings in the region, and traction in key markets such as Brazil, Mexico and Argentina could solidify its spot as a top three SVOD service operator throughout much of Latin America.