It's been a little over two weeks since Disney (NYSE:DIS) launched Disney+, its highly anticipated video-streaming service. Despite some initial technical hiccups, Disney grabbed 10 million sign-ups on the first day alone (including free trials and pre-launch subscriptions). Meanwhile, the bundle that includes Disney+, Hulu, and ESPN+ for $13 per month is enjoying robust demand, too. That trio of services costs the same price as Netflix's most popular plan.
Disney+ is already making progress toward its goal of reaching 60 million to 90 million subscribers by 2024.
Disney has a "pure genius strategy"
The New York Post reports that Disney+ is garnering nearly a million new subscribers every single day on average, citing app download data from mobile analytics specialist Apptopia.
The Disney+ mobile app has been downloaded an estimated 15.5 million times so far, with a substantial number of users converting from free trials to paid subscriptions. Apptopia estimates that the House of Mouse generated $5 million in revenue via in-app purchases and subscriptions in the first two weeks.
Mobile apps only capture part of the picture, as Disney has ensured broad distribution through smart TV platforms like Samsung and LG, as well as through digital streaming TV platforms operated by tech companies like Roku, Amazon, and Apple. Users can also subscribe and watch on desktop browsers. As one of the largest streaming TV platforms in the U.S., shares of Roku jumped on the news.
Apptopia's data also show a strong correlation with downloads for Hulu and ESPN+, which saw app downloads skyrocket by 55% and 50%, respectively, since Disney+ launched. That suggests strong uptake of the $13 bundle. At the end of the last quarter (before Disney+ went live), the company had 3.4 million ESPN+ subscribers and 28.5 million Hulu subscribers.
"The pricing, the content and the bundling was just a pure genius strategy from [CEO Bob] Iger and Disney," Wedbush analyst Daniel Ives told the outlet.
Separately, Disney continues to improve the app's feature set, recently adding a "Continue Watching" section so subscribers can pick up where they left off. That feature seems fairly basic and integral to boosting engagement but was oddly absent at launch.
Betting on the direct-to-consumer business
Disney is making a massive bet on growing its direct-to-consumer (DTC) business, which generated $9.3 billion in revenue last fiscal year. However, the segment's operating losses exploded to $1.8 billion, in part because Disney closed its blockbuster $71 billion acquisition of Twenty-First Century Fox assets during the year.
As part of that purchase, Disney secured a majority controlling stake in Hulu, which also meant the company had to change its accounting. Disney previously used the equity method of accounting for the investment, which is common when owning less than 50% of another company. The entertainment giant now consolidates Hulu results due to its majority stake.
In addition to absorbing those operating losses in order to grow the DTC segment, Disney also expects capital expenditures in fiscal 2020 to be $500 million higher than fiscal 2019 as it invests in the business.