Five on Friday: Subscriber Growth, Music Revenue and Meal Kits

Featuring Disney+, Hulu, The Atlantic and IAB

The COVID pandemic and politics have both affected subscription companies this year, and we’ll touch on some of those in this week’s edition of Five on Friday. With more people at home watching streaming TV, Disney+ is on track to surpass 123 million viewers by 2024, and recorded music revenue is up more than 5% for the first half of the year. Also, meal kits have grown in popularity with more families staying home for dinner, ad spending has seen a significant impact, but there is hope for the future, and The Atlantic has added 325,000 subscribers in the last year, after putting up its paywall and in response to comments from President Trump that the magazine was “dying.”

Disney+ Could Surpass 123 Million Viewers by 2024

eMarketer predicts that SVOD subscription service Disney+ could grow to 72.4 million users this year. Considering the OTT product just launched last November, those are pretty impressive subscriber numbers. According to eMarketer, 72.4 million subscribers would give Disney+ just over 32% of OTT viewers. Based on its estimated double-digit growth, eMarketer estimates that Disney+ could surpass Hulu’s subscriber total by 2024. ­

eMarketer predicts that Disney+ could surpass 123 million subscribers by 2024.

“Since its launch, Disney+ has been able to grow quickly by using a low price point and leveraging a vast library of content,” said Eric Haggstrom, eMarketer forecasting analyst at Insider Intelligence. “Bundled offerings with Hulu and ESPN+, as well as distribution deals with Verizon, have enabled it to grow new subscriptions quickly and reduce subscriber churn.”

In our Streaming Wars premium story published in August, Disney+ had 60.5 million subscribers, and the company had set a goal of reaching 90 million subscribers within the first five years. The company is well ahead of schedule in reaching that goal, so 123.4 million seems like a reasonable assumption.

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Currently, Netflix and Prime Video are Disney+’s largest competitors. Netflix has 193 million subscribers, and Amazon Prime has more than 150 million members, which includes Prime Video, but that is not an exact number. Amazon has not revealed how many subscribers Prime Video has. [eMarketer reports that Netflix has 168.9 million viewers, followed by Prime Video at 130.1 million.]

Recorded and Streaming Music Revenue Grows During First Half of 2020

During the first half of 2020, U.S. recorded music revenue grew 5.6% to $5.7 billion (retail), reports the Recording Industry Association of America (RIAA) in their mid-year report. During the first half of 2019, total retail recorded music revenue was $5.4 billion, and in the first half of 2018, it was $4.5 billion, showing steady growth for the last several years.

Streaming music revenue grew 12% to $4.8 billion in the first half of 2020, including revenue from streaming music subscription services including Spotify, Apple Music, Amazon, Pandora and Sirius XM. It also includes revenue from ad-supported streaming audio services, reports RIAA. Total paid subscription revenue increased 14% to $3.8 billion, now accounting for 67% of total streaming revenue.

RIAA also says that the number of paid subscriptions continued to increase quickly in the first half of 2020. For example, the average number of subscriptions was 72 million, a 24% increased compared to the first half of 2019. This represents an additional 1 million net subscriptions per month on average.

Ad-supported streaming services also saw an increase, growing 3% year-over-year to $421 million in the first half of 2020. While still an increase, previous years reflected double digit growth, showing the significant impact COVID-19 had on ad revenue during the first half of the year.

Revenue from physical products such as CDs were down 23% to $376 million. RIAA attributes this to the closure of retail stores and concert venues. For the complete 2020 mid-year report, visit RIAA.com.

The Pandemic Has Made Consumers Hungry for Meal Kit Subscriptions

The pandemic has changed virtually every aspect of our lives – from how we shop and eat to how we work and play. One industry that has benefited from the change in consumer habits is the meal kit subscription industry. Once shelter in place orders became common place, people could no longer dine out, so they ordered in more frequently. They also went to the grocery stores less often, yet consumers wanted good, fresh meals along with variety.

According to PYMTS’ September Commerce Tracker report, the meal kit subscription market is estimated to reach $20 billion by 2027 with a compound annual growth rate of 13%. As the pandemic continues, this demand could remain steady.

“The pandemic has lasted longer than any of us anticipated. After a number of weeks, this [purchasing behavior] just starts to stick,” said Julie Marchant-Houle, CEO for Martha & Marley Spoon and Dinnerly.

There are countless meal kits options available, and there is literally something to meet virtually every need, budget and taste. Some cater specifically to those with dietary restrictions or preferences, such as gluten free or dairy free meals. Last month, Real Simple outlined the top 20 meal subscription boxes, based on category (price, value, lifestyle, etc.). Here is a sampling of their recommendations:

Best overall: Hello Fresh
Best for quick meals: Blue Apron
Best for easy meals: Martha & Marley Spoon
Most customizable: Home Chef*
Best vegan: Purple Carrot
Most affordable: Dinnerly
Best pre-cooked: Freshly

Most meal subscription kits work the same way. The meal kit service offers different plans based on budget, taste and family size. For example, with Hello Fresh, subscribers choose their preference: meat and vegetables, vegetables only, family friendly or calorie smart. Then they choose the number of people in their household (2, 3 or 4) and the number of recipes/meals per week (2, 3, 4 or 5). Each service is priced at $8.99, and a week’s meals are shipped for $7.99. Right now, many of these meal kit subscription services are offering a promotional discount off the first week’s meals, making them quite affordable for a trial.

*Some meal kit subscriptions have partnered with retail outlets to make their meals more widely available and on a one-off basis versus subscriptions. Home Chef, for example, is available in some Kroger-owned grocery stores like QFC and Fry’s. Dinner Daily has also joined Kroger’s ranks, making its meals available in Kroger stores in 24 states.

A screenshot of some of Dinnerly’s meal options for the week of Sept. 21.

IAB Report: COVID Ad Spend Impact 2020-21

In a new report by the Interactive Advertising Bureau, the IAB quantifies the ad spend impact of COVID-19 and it forecasts what we can expect to see the rest of 2020 and into 2021. Overall, IAB expects to see a 6% increase in digital ad spending compared to 2019. Traditional ad spend, however, is not expected to rebound. Highlights from the report include the following:

  • Across all media types, U.S. ad spend is expected to drop 8% with a 30% decline in traditional media and a 6% increase in digital media.
  • 2020 traditional TV ad spending will decrease 24%, compared to 2019, while 2020 digital media advertising will increase, 19% compared to last year.
  • Paid search advertising will increase 26%, social advertising will increase 25% and CTV will increase 19%.
  • Digital audio and podcast advertising will decrease slightly over 2019.
  • DOOH (digital out-of-home media advertising like billboards and outdoor signage) will see the biggest drop: 43% compared to 2019.
  • Ad buyers are still planning for 2021 with only 9% with clearly defined budgets and 70% with ballpark advertising estimates for next year.
  • Based on survey results, IAB calculated a buy-side estimate of a 5.3% increase in year-over-year 2021 ad budgets.

One key concern in planning advertising is buyers’ concerns over having their ads place alongside user generated content with 41% of survey respondents extremely concerned and 27% fairly concerned. ­In addition, 46% of buyers have either temporarily paused or plan to pause their social media ads or who have canceled their social media ad placements altogether. In July, for example, more than 400 brands boycotted Facebook ads for allowing hate speech and hostile content on the social platform (#StopHateForProfit).

For a more detailed analysis of the report’s findings, visit IAB.com to download the 2020/21 COVID Impact on Advertising report.

The Atlantic Adds 325K Subscribers, Far Ahead of Its Two-Year Goal

Remember that time President Donald Trump said The New York Times is a failing newspaper, and it should be dismissed as fake news? He had similar thoughts about The Atlantic, calling it a “dying” magazine. That hasn’t stopped the magazine from prospering, however. In fact, since the magazine erected a paywall last year, the company has added 325,000 new subscribers, including 20,000 who can be attributed to Trump’s comments.

Last week, CNN Business reported that President Trump called The Atlantic a “dying” magazine after they published an article about his negative comments about Americans who have died in war. The article, “Trump: Americans Who Died in War are ‘Losers’ and ‘Suckers’” drew the ire of more than 20,000 readers who subscribed to the publication after hearing Trump’s comments.

Aside from that “Trump bump,” The Atlantic set a conservative goal of adding 110,000 subscribers within the first two years of putting up the paywall. The 163-year-old magazine has far exceeded that goal. It is also more than halfway to its goal of 1 million print subscribers by December 2022, said CNN.

Editor-in-Chief Jeffrey Goldberg said they have been successful because of the magazine attempts to cover the hot topics of the day in a way that no one else is doing.

“We’re constantly trying to punch above our weight,” said Goldberg in an interview with CNN Business. “We have an advantage in that nobody comes to us looking for sports, traffic or weather. Our readers aren’t expecting anything other than excellent stories about important subjects.”

Despite layoffs at The Atlantic this year, the magazine has continued to print vital coverage of topics like the pandemic which continues to draw readers to the magazine, whether the digital or print versions, or both. The company’s primary focus is quality journalism, and they stand behind their stories regardless of what the president may say or tweet about them.