U.K. analyst firm Digital TV (DTV) Research forecasts that Disney+ will have 294 million subscribers in 2026, 8 million more than the company is forecasting for Netflix in the same year. Disney believes it can achieve at least that many customers. At the end of last year, the company said that it expects Disney+ to have between 230 and 260 million subscribers two years earlier, in 2024.
Disney+ will struggle to match Netflix ARPU
Whether Disney+ meets or exceeds DTV’s subscriber forecast, it will almost certainly earn considerably less revenue than Netflix. There are two primary reasons for the weaker performance. Firstly, Disney+ is priced very aggressively to drive subscriber acquisition. The average revenue per unit (ARPU) is $4.03 per month. Netflix’s average ARPU is $10.79.
Disney has five years to bring its pricing more into line with Netflix. However, it won’t be easy to achieve. It must raise ARPU 22% a year for the next five years to catch up with what Netflix is receiving today. It must also dramatically boost the flow of new content into the service, or it will struggle to keep churn low enough to reach the targeted subscriber numbers.
The company plans to deliver 10 Marvel series, 10 Star Wars series, and 15 Disney and Pixar animated series over the next several years. It also plans 15 live-action and animated movies targeted for the service over the same period. However, that is far behind Netflix’s furious content release pace. It plans to deliver at least one movie per week in 2021, not to mention all the original series it will debut.
India is killing Disney+ ARPU
The acquisition of 21st Century Fox in 2019 catapulted Disney into the upper echelons of streaming companies because the purchase brought with it India’s Hotstar. The service remains the top streaming premium video service in the market. After a rebranded to Disney+ Hotstar, it has become tremendously important to Disney+ growth. According to Christine McCarthy, Disney’s Senior Executive Vice President and Chief Financial Officer:
“Disney+ Hotstar subscriber additions continued their strong growth trend, with Disney+ Hotstar subscribers making up approximately 30% of our global subscriber base.”
The Indian market can support only a much lower price than in the U.S. The entry-level price is Rs 299 ($4) a month. With most of the 28+ million Indian subscribers paying such a low price, their impact has a huge negative impact on overall ARPU. Ms. McCarthy says Disney+ ARPU would be $5.37 (a third higher), excluding Indian customers.
Netflix is cutting prices to grow subscribers in the Indian market. However, its exposure is much less than Disney. It is estimated to have just 4.6 million paying customers there.
According to DTV Research, Disney+ will earn $21 billion globally in 2026. The research company expects Netflix, which earned $25 billion in 2020, to earn almost twice as much as Disney+ in 2026. The truth is, it could take Disney+ a decade or more to erode Netflix’s revenue advantage.