Hulu is coming to Disney+.
By the end of 2023, Disney will roll out a single app experience that incorporates Hulu content on Disney+, available to customers who subscribe to both streaming services.
Disney+, Hulu and ESPN+ will still be available as standalone options, but during Disney’s second-quarter earnings call on Wednesday, CEO Bob Iger said that he views the new strategy as a “logical progression” of the company’s direct-to-consumer offerings.
“[It] will provide greater opportunities for advertisers, while giving bundle subscribers access to more robust and streamlined content, resulting in greater audience engagement and ultimately leading to a more unified streaming experience,” said Iger, also adding he expects the singular experience to lower churn.
With the news coming just ahead of Disney’s upfront next week, Iger described the advertising platform of the combined experience as “incredibly exciting,” as over 40% of Disney’s domestic advertising portfolio is addressable.
Iger said Disney has added over 1,000 advertisers over the past year, bringing the total to 5,000 advertisers across its streaming platform, with over one-third buying programmatically.
“As we look to this upfront, and after careful and considerable discussion with our sales team led by Rita Ferro, there’s going to be a substantial growth in digital advertising,” said Iger.
The company is also hopeful that the combination of Disney+ and Hulu will increase its digital opportunity to serve digital ads and grow its advertising business.
The last time a major media company combined content from two streaming services, the industry got Paramount+ and Showtime—which are now merging into a single service. While Disney has the option to buy Comcast’s 33% Hulu stake starting in January 2024, it had not been clear what the company planned to do.
“It’s not really been fully determined what will happen in that regard, except that as we’ve looked more and more in the future of our streaming business… it’s clear that a combination of the content that is on Disney+ with general entertainment is a very strong combination,” said Iger.
Price hikes incoming
In December, Disney raised prices for Disney+, Hulu and ESPN+, and expect to see a higher price for Disney+’s ad-free tier once again later this year. Disney+ (with ads) currently costs $7.99 per month, and the ad-free tier comes in at $10.99 per month or $109.99 annually.
“The pricing changes we’ve already implemented have proven successful,” said Iger.
Disney+ lost four million global subscribers during the first three months of 2023—its second consecutive drop—dipping to 157.8 million. The U.S. and Canada lost 300,000 subscribers, with the majority of churn coming from Disney+ Hotstar.
CFO Christine McCarthy attributed the domestic drop to “continued impacts” from the prior price increase.
“We were pleasantly surprised that the loss of subs due to what was a substantial increase in pricing for the non-ad-supported Disney+ product was de minimis,” said Iger. “That leads us to believe that we in fact have pricing elacsticity.”
Hulu added 200,000 subscribers to reach 48.2 million, and ESPN+ gained 400,000 to hit 25.3 million subscribers.
Say goodbye to (some) content
Disney is also set to remove “certain content” from its streaming platforms, according to McCarthy. The company is bracing for an incoming impairment charge of $1.5 to $1.8 billion, coming in the third quarter.
“Going forward, we intend to produce lower volumes of content in alignment with this strategic shift,” McCarthy added.
According to Iger, the company realized that much of the content it created has not been driving subscriber growth, and Disney will be getting “much more surgical” about what it produces.
“As we look to reduce content spend, we’re looking to reduce it in a way that should not have any impact on at all on subs,” said Iger. “We believe that there is an opportunity for us to focus more on real sub-drivers.”
“When you make a lot of content, everything needs to be marketed,” he added. “You’re spending a lot of money marketing things that are not going to have an impact on the bottom line, except negatively, due to the marketing costs.”
Disney’s DTC department lost $659 million in the quarter, an improvement from the $1.05 billion it lost last quarter. And while McCarthy anticipates wider losses in the third quarter, the executive reiterated that 2022’s fourth quarter $1.5 billion DTC drop should be peak losses.