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Disney, Other Streaming Giants Confront Era of Slowing Subscriber Growth

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The days of easy subscriber growth in the streaming industry are over.

Rivals abound, inflation is high, creating compelling content is expensive and consumers are increasingly willing to jump from service to service in search of a hot new show or movie.

In the latest shake-up for the industry, Disney’s board of directors on Sunday replaced Chief Executive

Bob Chapek

with former Chairman and CEO

Robert Iger.

This month,

Disney

DIS 6.30%

reported accelerating losses in its streaming business.

In an ever-more competitive field, here are some of the challenges and opportunities that streaming services face.

Subscriber Growth Easing

Streaming services are adding customers, but many are doing so more slowly.

At several premium streaming services—including

Netflix,

Disney-controlled Hulu and ESPN+, and Paramount’s Paramount+ and Showtime—growth in the number of subscribers year-over-year has slowed or stayed flat for at least the past three consecutive quarters.

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming

services are adding customers at a

slower pace than in the past.

Paid subscribers, change from

a year earlier, select services

While still expanding, many

streaming services are adding

customers at a slower pace

than in the past.

Paid subscribers, change from

a year earlier, select services

“It’s not slowing because the market’s crappy, it’s slowing because penetration got very high,” said Marc DeBevoise, chief executive of the video-technology company Brightcove and a former ViacomCBS executive.

Not all companies publicly report subscriber counts, including

Apple Inc.’s

Apple TV+ service and

Amazon.com Inc.’s

Prime Video.

Global paid subscribers, in millions

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

Amid the slowing subscriber growth, companies and investors are focusing less on user counts and more on profits.

Netflix has added an ad-supported tier of service and told shareholders last month that it will soon roll out a plan to urge members who share passwords to pay more.

Warner Bros. Discovery

CEO

David Zaslav

has said “profitability, not purely sub count, is our benchmark for success.” And former Disney CEO Bob Chapek has said the company expects Disney+ to reach profitability in fiscal 2024, “assuming we do not see a meaningful shift in the economic climate.”

Apple TV’s ‘Ted Lasso’ won the Emmy for outstanding comedy series in 2022, the second year in a row.



Photo:

Apple TV+/Associated Press

Disney+ added 12.1 million new accounts in the three months ended Oct. 1, but quarterly losses at the company’s streaming business more than doubled from a year earlier.

Streaming is growing as a share of U.S. television viewership, according to data from Nielsen. Americans spent more time streaming content than watching cable for the first time in July.

Streaming growth was slower in October compared with previous months, Nielsen said in a release published last week, though total streaming usage is up 35.1% over the past year.

Keeping Customers Is Getting Harder

Increased streaming competition means consumers have more choices, and more opportunities to drop paid subscriptions.

Roughly 20% of subscribers to premium streaming services canceled three or more services in the past two years as of October, according to data from subscriber-measurement firm Antenna, up from 8% two years ago. That group of services includes Netflix, Hulu, AppleTV+, HBO Max and Disney+, among others.

The monthly “churn rate,” or customer cancellations as a share of the previous month’s subscribers, is also on the rise among premium video services, Antenna data show.

Cancellations as a share of the prior month’s total subscriber count, or “churn rate”

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Antenna’s models use data compiled from third-party services that collect consumer information, with permission, from sources including online purchase receipts, bills and banking records.

The postpandemic environment and economic pressures may also be playing a role in retention challenges.

“As the world’s come back to normal and as inflation has reared its ugly head, there are other places where people have to spend money,” said

Michael Nathanson,

an analyst at MoffettNathanson, a division of

SVB Securities.

Millie Bobby Brown in Netflix’s ‘Stranger Things.’



Photo:

NETFLIX/Associated Press

Managing Costly Content

Streaming services have said top-quality content is the strongest ammunition in their arsenal as they compete for customers, but leaders have also encouraged their content executives to be choosier in the projects they pursue.

Streamers spend billions of dollars on content every quarter, according to estimates from research firm Ampere Analysis, led by giants like Netflix and Amazon.

Disney has said it plans to cut marketing and content budgets. Mr. Zaslav of Warner Bros. Discovery said a strategy to “spend money with abandon while making a fraction in return, all in the service of growing sub numbers,” is flawed.

Some platforms may also be looking to funnel spending into new categories of content in an effort to find and keep consumers. Netflix is exploring investments in sports leagues and bidding on streaming rights, The Wall Street Journal recently reported, though it has said it would keep its annual content spending roughly steady at $17 billion for the next few years.

Selena Gomez, from left, Steve Martin and Martin Short in a scene from Hulu’s ‘Only Murders in the Building.’



Photo:

Craig Blankenhorn/Associated Press

Selling New Pricing Tiers and Bundles

Some streamers are turning to new pricing strategies as a way to entice customers and boost their bottom lines.

Netflix began rolling out an ad-supported tier of service in select countries earlier this month, called “Basic with Ads,” and priced at $6.99 a month. Disney+’s ad-backed tier will start at $7.99 and is expected to launch in December, when Disney plans to raise the price of its ad-free, stand-alone Disney+ service to $10.99, from $7.99.

Streaming-service pricing, monthly

Ad-supported service only

Ad-supported service only

Ad-supported service only

Ad-supported service only

Ad-supported service only

Companies including Disney and Paramount are also offering “bundles,” a package of streaming services available for a lower price than purchasing each one individually. Disney recently said that bundling drives higher overall subscription revenue and lower rates of customer defections.

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually

and as a bundle

Monthly prices, for services sold individually

and as a bundle

The new pricing plans and bundles are an opportunity for streaming companies to diversify their business models and offer consumers more choices, Mr. DeBevoise said. He expects to see more bundling options in the future, but said there is risk in making things too complicated for customers.

“Simplicity works,” he said.

Write to Nate Rattner at [email protected] and Sarah Krouse at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8


The days of easy subscriber growth in the streaming industry are over.

Rivals abound, inflation is high, creating compelling content is expensive and consumers are increasingly willing to jump from service to service in search of a hot new show or movie.

In the latest shake-up for the industry, Disney’s board of directors on Sunday replaced Chief Executive

Bob Chapek

with former Chairman and CEO

Robert Iger.

This month,

Disney

DIS 6.30%

reported accelerating losses in its streaming business.

In an ever-more competitive field, here are some of the challenges and opportunities that streaming services face.

Subscriber Growth Easing

Streaming services are adding customers, but many are doing so more slowly.

At several premium streaming services—including

Netflix,

Disney-controlled Hulu and ESPN+, and Paramount’s Paramount+ and Showtime—growth in the number of subscribers year-over-year has slowed or stayed flat for at least the past three consecutive quarters.

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming services are adding

customers at a slower pace than in the past.

Paid subscribers, change from a year earlier, select services

While still expanding, many streaming

services are adding customers at a

slower pace than in the past.

Paid subscribers, change from

a year earlier, select services

While still expanding, many

streaming services are adding

customers at a slower pace

than in the past.

Paid subscribers, change from

a year earlier, select services

“It’s not slowing because the market’s crappy, it’s slowing because penetration got very high,” said Marc DeBevoise, chief executive of the video-technology company Brightcove and a former ViacomCBS executive.

Not all companies publicly report subscriber counts, including

Apple Inc.’s

Apple TV+ service and

Amazon.com Inc.’s

Prime Video.

Global paid subscribers, in millions

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

HBO Max/

Discovery+†

95

Amid the slowing subscriber growth, companies and investors are focusing less on user counts and more on profits.

Netflix has added an ad-supported tier of service and told shareholders last month that it will soon roll out a plan to urge members who share passwords to pay more.

Warner Bros. Discovery

CEO

David Zaslav

has said “profitability, not purely sub count, is our benchmark for success.” And former Disney CEO Bob Chapek has said the company expects Disney+ to reach profitability in fiscal 2024, “assuming we do not see a meaningful shift in the economic climate.”

Apple TV’s ‘Ted Lasso’ won the Emmy for outstanding comedy series in 2022, the second year in a row.



Photo:

Apple TV+/Associated Press

Disney+ added 12.1 million new accounts in the three months ended Oct. 1, but quarterly losses at the company’s streaming business more than doubled from a year earlier.

Streaming is growing as a share of U.S. television viewership, according to data from Nielsen. Americans spent more time streaming content than watching cable for the first time in July.

Streaming growth was slower in October compared with previous months, Nielsen said in a release published last week, though total streaming usage is up 35.1% over the past year.

Keeping Customers Is Getting Harder

Increased streaming competition means consumers have more choices, and more opportunities to drop paid subscriptions.

Roughly 20% of subscribers to premium streaming services canceled three or more services in the past two years as of October, according to data from subscriber-measurement firm Antenna, up from 8% two years ago. That group of services includes Netflix, Hulu, AppleTV+, HBO Max and Disney+, among others.

The monthly “churn rate,” or customer cancellations as a share of the previous month’s subscribers, is also on the rise among premium video services, Antenna data show.

Cancellations as a share of the prior month’s total subscriber count, or “churn rate”

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Full range among premium

streaming services

Antenna’s models use data compiled from third-party services that collect consumer information, with permission, from sources including online purchase receipts, bills and banking records.

The postpandemic environment and economic pressures may also be playing a role in retention challenges.

“As the world’s come back to normal and as inflation has reared its ugly head, there are other places where people have to spend money,” said

Michael Nathanson,

an analyst at MoffettNathanson, a division of

SVB Securities.

Millie Bobby Brown in Netflix’s ‘Stranger Things.’



Photo:

NETFLIX/Associated Press

Managing Costly Content

Streaming services have said top-quality content is the strongest ammunition in their arsenal as they compete for customers, but leaders have also encouraged their content executives to be choosier in the projects they pursue.

Streamers spend billions of dollars on content every quarter, according to estimates from research firm Ampere Analysis, led by giants like Netflix and Amazon.

Disney has said it plans to cut marketing and content budgets. Mr. Zaslav of Warner Bros. Discovery said a strategy to “spend money with abandon while making a fraction in return, all in the service of growing sub numbers,” is flawed.

Some platforms may also be looking to funnel spending into new categories of content in an effort to find and keep consumers. Netflix is exploring investments in sports leagues and bidding on streaming rights, The Wall Street Journal recently reported, though it has said it would keep its annual content spending roughly steady at $17 billion for the next few years.

Selena Gomez, from left, Steve Martin and Martin Short in a scene from Hulu’s ‘Only Murders in the Building.’



Photo:

Craig Blankenhorn/Associated Press

Selling New Pricing Tiers and Bundles

Some streamers are turning to new pricing strategies as a way to entice customers and boost their bottom lines.

Netflix began rolling out an ad-supported tier of service in select countries earlier this month, called “Basic with Ads,” and priced at $6.99 a month. Disney+’s ad-backed tier will start at $7.99 and is expected to launch in December, when Disney plans to raise the price of its ad-free, stand-alone Disney+ service to $10.99, from $7.99.

Streaming-service pricing, monthly

Ad-supported service only

Ad-supported service only

Ad-supported service only

Ad-supported service only

Ad-supported service only

Companies including Disney and Paramount are also offering “bundles,” a package of streaming services available for a lower price than purchasing each one individually. Disney recently said that bundling drives higher overall subscription revenue and lower rates of customer defections.

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually and as a bundle

Monthly prices, for services sold individually

and as a bundle

Monthly prices, for services sold individually

and as a bundle

The new pricing plans and bundles are an opportunity for streaming companies to diversify their business models and offer consumers more choices, Mr. DeBevoise said. He expects to see more bundling options in the future, but said there is risk in making things too complicated for customers.

“Simplicity works,” he said.

Write to Nate Rattner at [email protected] and Sarah Krouse at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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