The headlines for Walt Disney's (DIS 1.84%) streaming services constantly highlight Disney+ -- for good reason. The launch of Disney+ is one of the best business launch success stories of all time, going from zero to 100 million subscribers in a little over 12 months.
And there is no question that when it's all said and done, Disney+ will be the premier streaming service the company offers. However, I'm going to argue that for now, one of its other banners is the star in its lineup: Hulu.
Measuring Disney+ against Hulu
Hulu had a total of 39.4 million subscribers as of Jan. 2. While that was a far cry from the 94.9 million subs Disney+ boasted, Hulu is generating more revenue.
Customers can choose between two versions of Hulu: the streaming video-on-demand (SVOD) most consumers expect and a second package that also includes live TV. The two have 35.4 million and 4.0 million subscribers, respectively. What's important is that Disney generated average monthly revenue per user (ARPU) of $13.51 from its SVOD-only subscribers and $75.11 from SVOD and live-TV customers in the fiscal 2021 first quarter.
Both are far higher than the $4.03 ARPU for Disney+, and therein lies my argument for why Hulu is the real star. Its subscribers generate approximately $779 million in revenue each month, while Disney+ brings in about $382 million.
Admittedly, Hulu's time at the top is limited. It is offered in the U.S. only, while Disney+ is quickly expanding across the globe. Management has forecast Disney+ will reach an estimated 230 million subscribers by 2024, while Hulu will reach 50 million.
Moreover, the content budget for Disney+ is much higher than for Hulu. With Disney+ being available to more people and being home to some of the most popular entertainment franchises today, it is safe to assume that it's only a matter of time until it overtakes Hulu in its contribution to the top line.
Insurance against the decline of cable television
It's no secret that the popularity of cable television is declining. According to Statista, the number of households subscribing to pay TV will decline from 74 million to 70 million by 2025. Disney relies on cable-television viewers for a big part of its annual revenue and operating income. In fact, in 2020, when the pandemic ravaged its business, the vast majority of its operating income came from its media segment. It stands to lose that lucrative source of revenue as more people cancel their cable subscriptions.
Hulu's live-TV offering provides Disney with some insurance against the cord-cutting trend by giving customers the option to access some of the same cable channels they had previously but with a few differences. For one, consumers would get the service over the internet rather than a cable box, which offers a great deal more convenience. Subscriptions to Hulu and live TV increased 25% in 2020, serving as a bridge for those who want the convenience a streaming service provides -- plus some of the live content from their previous cable packages -- without the hassles and prices that come with a cable contract.
Besides bringing in more revenue than Disney+, Hulu provides the company with some protection against the headwinds in its media segment. Disney+ will eventually be the star for the entertainment giant in the long run, but for now, Hulu should enjoy some time in the spotlight.