The market didn't seem to like Disney's (DIS 1.09%) fiscal second-quarter earnings report because the Disney+ streaming service no longer looks like the growth engine it had been.

Although the service's meteoric rise to over 100 million subscribers in 14 months was remarkable, it may have plateaued and future growth may be anemic. Even Disney says not to expect much, at least for the rest of this year.

Disney+ logo

Image source: Disney.

The benefit of good timing

Disney+ was launched at just the right moment to capitalize on governments shutting down their economies amid a global pandemic. Locked down and forced to stay at home, consumers turned on and tuned in to the streaming service.

And consumers' massive acceptance of the streaming platform may have also played a big role in just how many other competing streaming services were launched last year by rival broadcasters and studios, and how fast. While those kinds of decisions are planned for well in advance, the mega hit Disney+ became caused the competition to accelerate their own offerings.

Yet within Disney's success are the seeds of the problem it is confronting now.

Tuning out

Disney reported only 8.7 million subscribers were added to Disney+ in the quarter, far below the 14.4 million Wall Street was expecting. It ended the period with 103.6 million subscribers, or nearly 6 million less than the 109.3 million analysts estimated.

And much of that growth was due to international markets, primarily India's Disney+ Hotstar channel, which was responsible for most of the additions in the quarter. The service accounts for about one-third of the total Disney+ subscriber base.

It also significantly lowered Disney's average revenue per user, which fell from $5.63 to $3.99, and may explain why Disney hiked the price of Disney+ by $1 per month. I won't break anyone's bank, but indicates the service may need to continue raising prices going forward to bolster the bottom line, and that may eventually weigh on future growth.

Part of Disney+ problem was the economy reopened, which gave people something to do other than watch TV. That was also evident in Netflix's (NFLX 1.74%) own earnings report, which saw it add only 4 million new subscribers, below the 6 million analysts expected. It has forecast sharply lower subscriber additions for the next quarter too.

Disney itself is forecasting weak net subscriber additions in the second half of 2021. Although it reaffirmed its estimate of having 230 million to 260 million Disney+ subscribers globally by the end of 2024, that's based on it becoming available in more countries. 

Also all those one-year free trials that Verizon and others gave out have been lapped, and many didn't reup the service.   

An opportunity for redemption

Disney's quarter was actually a solid one, but overshadowed by Disney+ because the streaming service is what sustained the entertainment powerhouse during the pandemic.

Disney+ is still growing, but investors will need to look overseas to see it happening. It got off to a fast start by a confluence of good timing and global events, but the U.S. may be a market that's now largely tapped out.