Disney’s Direct-to-Consumer Subscriptions Save Q1 FY21

Disney+ soars to 94.9 million subscribers, ahead of the company's four-year goal.

The Walt Disney Company’s first quarter results for fiscal year 2021 were brutal with revenue down 22%, net income from continuing operations down 99%, and diluted earnings per share down 98% year-over-year. Disney’s direct-to-consumer subscriptions were a major bright spot in the quarter, with Disney+ paid streaming subscribers growing to 94.9 million, compared to 26.5 million for the same quarter in 2020.

As of January 2, 2021, Disney had the following subscribers for its direct-to-consumer streaming services:

As Jan. 2, 2021 Q1 FY21 (in millions)As of Dec. 28, 2019 Q1 FY20 (in millions)% Change
Disney+94.926.5>100%
ESPN+12.16.683%
Hulu   
SVOD only   
Live TV + SVOD
35.4
4.0
27.2
3.2
30% 25%
TOTAL PAID SUBSCRIBERS146.463.5>100%

CEO comments

Bob Chapek, CEO of The Walt Disney Company, commented on the company’s first quarter.

“We believe the strategic actions we’re taking to transform our company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we’ve made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter,” Chapek said.

“We’re confident that, with our robust pipeline of exceptional, high-quality content and the upcoming launch of our new Star-branded international general entertainment offering, we are well-positioned to achieve even greater success going forward,” the CEO added.

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Quarterly financial highlights

Financial highlights for the first quarter of fiscal year 2021 include the following:

  • Total revenue was $16.2 billion, compared to $20.9 billion in Q1 FY20, a 22% decrease.
  • Net income from continuing operations was $29 million, compared to $2.1 billion in Q1 FY20, a 99% decrease.
  • Diluted earnings per share from continuing operations was $0.02, compared to $1.17 in Q1 FY20, a 98% decrease.

Disney outlined some of the most significant impacts to its operation as a result of the pandemic.

  • Disney theme parks were closed or operating at significantly reduced capacity. The outlook for parks will depend on the rate of vaccinations, Chapek said on the earnings call.
  • Cruises and guided tours were suspended.
  • Certain theatrical releases were delayed, shortened or canceled, and stage plays were suspended.
  • Production of film and TV has been disrupted, and some key live sports programming was canceled.
  • The organization has incurred additional costs to comply with government regulations and protocols to ensure the safety of employees, talent and guests. Total impact is estimated at $1 billion for fiscal 2021.

Direct-to-consumer subscriptions

  • Revenue from direct-to-consumer subscriptions increased 73% to $3.5 billion, and operating loss dropped from $1.1 billion to $466 million.
  • Disney+’s average revenue per user (ARPU) decreased from $5.56 to $4.03 year-over-year
  • ESPN+’s ARPU increased from $4.44 to $4.48 year-over-year.
  • Hulu’s ARPU for the SVOD product increased from $13.15 to $13.51, and the LIVE TV + SVOD product’s ARPU increased from $59.47 to $75.11 year over-year.
  • Hulu’s increase in revenue was due to subscriber growth and increased advertising revenue from higher impressions, though it was offset by programming and production costs.
  • Disney+ success was due to the dramatic increase in subscribers, but that revenue was offset by costs from programming, production, marketing and technology costs. The company expects for Disney+ to be profitable by fiscal 2024.
Disney's Direct-to-Consumer Subscriptions Save Q1 FY2021
Disney’s direct-to-consumer subscriptions saved the company’s first quarter of fiscal year 2021. Image courtesy of Disney.

Insider Take

Disney has been hit hard by the pandemic, so the financials did not come as a surprise. What was unexpected, however, was Disney+’s meteoric rise in direct-to-consumer subscriptions. The streaming service launched in November 2019, and it has grown beyond its four-year goal already. The company’s pending price increase and the launch of its Star direct-to-consumer streaming subscription service in Europe, Canada and New Zealand this month will continue to boost those DTC streaming numbers. For now, it looks like the streaming services are going to have to carry Disney.