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Not Even Hulu's Immune to Cord-Cutting

By Adam Levy - Feb 16, 2021 at 11:30AM

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Disney reported its first-ever subscriber decline for Hulu + Live TV.

Walt Disney's (DIS 3.69%) Hulu + Live TV service racked up 1.2 million net subscriber additions in fiscal 2020 while traditional pay-TV providers lost millions of subscribers. But it looks like the trend away from live television service has finally caught up to the leading virtual MVPD (multichannel video programming distributor). Disney reported Hulu + Live TV subscribers of 4 million at the end of its first quarter, down about 100,000 from three months prior.

Here's how Hulu's live TV subscriber losses compare with those of its competitors, and what it means for Hulu and Disney's overall business.

A pair of scissors about to cut a cable.

Image source: Getty Images.

Cord-cutting finally catches up

After several quarters of defying industry trends, Hulu's subscriber losses looked comparable to those of its traditional TV competitors in the last quarter.

Pay-TV Provider

Q4 2020 Subscriber Losses

Comcast (CMCSA 1.18%)

248,000

AT&T (T 1.84%)

643,000

Charter

35,000

Verizon

73,000

Hulu + Live TV

~100,000

Data source: Company quarterly reports.

It's important to note that in Disney's reporting, subscribers are rounded to the nearest 100,000, so the actual number of subscriber losses could be more or less than that number. Nonetheless, last quarter represented the first time Disney reported a subscriber decline for Hulu + Live TV since it started disclosing the numbers at the start of 2019. 

Hulu notably raised prices on subscribers in mid-December by $10 per month. That follows a similar price increase from a year prior. The impact was seen on Hulu's first quarter 2020 Live TV subscribers as well, which remained flat sequentially. So, it could just be increased subscriber churn as the company saw an influx of cancellations when the price hike went into effect.

Traditional MVPDs also increased their prices in 2020, and those like Comcast and AT&T that focused more on high-value video customers lost more subscribers as a result. 

Hulu and Disney's other streaming services are growing like gangbusters

Despite the decline in Live TV subscribers, Hulu's SVOD-only service added 2.9 million subscribers last quarter.

What's more, Hulu's average revenue per subscriber for the SVOD service increased to $13.51 per month from $13.15 a year ago. That's despite ongoing headwinds in the advertising market due to COVID-19 and more subscribers taking the bundle of Disney+, Hulu, and ESPN+, which puts downward pressure on subscription revenue. That indicates higher engagement and better ad sales for Hulu, and bodes well for the service's future as ad spending continues to shift to connected TV.

Growing revenue per user from the SVOD service may enable Disney to curtail price hikes for the Live TV service. Since the Live TV service comes with the SVOD service -- it actually pushes subscribers to the SVOD service instead of using DVR -- Hulu's Live TV + SVOD average revenue per user could keep growing without another price hike. 

That may allow continued subscriber additions for the service, benefiting Disney's cable networks business. The media company's domestic network revenue was roughly flat last quarter as affiliate rate increases offset declines in subscribers.

Meanwhile, Disney+ and ESPN+ continue to grow much faster than anticipated. Disney+ ended the quarter with 94.9 million subscribers, about 30% of whom subscribed to Disney+ Hotstar. Another 12.1 million subscribed to ESPN+, which has benefited from the bundled offering. 

While Hulu's net subscriber loss for its Live TV product is a bit disappointing, it hasn't impacted Hulu's SVOD subscriber growth or the rest of the direct-to-consumer business. But it'll be an important metric to pay attention to as the company reports earnings results in subsequent quarters. It's now an important source of subscribers for the cable network business and can lead to increased engagement, subscriber retention, and ad impressions on the Hulu SVOD platform. 

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The Walt Disney Company Stock Quote
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