Disney+ rapidly grew its reputation and subscriber base in the two years since it launched but recent trends suggest that the service may be reaching a plateau.
During the third quarter, Disney+ added just 2.1 million subscribers—taking its total to just over 118 million. It’s a slowdown that was foreshadowed by CEO Bob Chapek but nevertheless one that led to a steep selloff of the company's stock. It’s also led to much consternation among industry analysts over whether the content lineup at Disney+ needs to expand to attract new customers.
Apparently, the argument is going on at Disney, too. According to Puck’s Dylan Byers, Disney insiders are locked in a “heated debate” over expanding the Disney+ lineup beyond family-friendly content. Chairman Bob Iger reportedly wants Disney+ to stay in its lane while Chapek intends to expand it, though doubts surround whether he possesses the “creative vision” to get it right.
“Notice that Netflix spends insane amounts and makes a ton of crap,” a source told the publication. “A handful of phenom hits in a giant pile of crud.”
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MoffettNathanson analyst Michael Nathanson still sees Disney+ still on track to achieve its 2024 subscriber guidance of 230 million to 260 million and pointed out that Disney+ managed to add an “impressive” 44.4 million subscribers during the company’s fiscal 2021, 50% of which came in through Disney+ Hotstar.
He added that Disney+ has generated “best-in-class awareness scores” in the U.S. but will need to expand its general entertainment content to keep reaching new households both domestically and internationally.
“…[Disney+] has failed to penetrate older demographics of [households] 50+. Those homes might not necessarily have young kids attracted to Disney’s content or be super fans of Marvel, Pixar or Star Wars content,” wrote Nathanson. “As such, the path for deeper [household] penetration has to be through the development of off-brand, general entertainment content that has the feel of Netflix, or say…Hulu.”
To its credit, Disney last week provided a big sneak peek at all the content slated for 2021 and 2022, a lineup that should keep Marvel, Star Wars and other Disney brand fans on the platform in the near-term. The company last week also rolled out an aggressive promotion charging $1.99 for the first month of Disney+ for new and eligible returning subscribers, which could help spark some accelerated growth in the fourth quarter.