Walt Disney (NYSE:DIS) had no shortage of fans champing at the bit to sign up for Disney+ when the service launched in late 2019. The media company quickly found tens of millions of people signing up for a subscription, surpassing nearly everyone's expectations.

But Disney has struggled to grow the North American subscriber base in 2021. It only added around 1 million net new subscribers in the U.S. and Canada during its fiscal third quarter, according to documents seen by The Information. With about 38 million subscribers across the two countries, has Disney already saturated the market?

The Disney+ logo.

Image source: Walt Disney.

How Disney+ compares to the competition

With roughly 38 million subscribers in the U.S. and Canada, Disney+ has far fewer subscribers than Netflix (NASDAQ:NFLX). It also reaches fewer households than HBO Max, currently owned by AT&T (NYSE:T), as well as Disney's other streaming service, Hulu.

Service

U.S. and Canada Subscribers

Netflix

74.4 million

HBO Max

40.6 million*

Hulu

41.6 million*

Disney+

38 million

Data sources: Netflix, AT&T, and Walt Disney quarterly filings and The Information. *U.S. only.

While all three of the aforementioned competitors had a head start on Disney+, the fact that Disney's growth is showing signs of stalling out at lower levels may be a bit surprising to some investors. That's especially true considering the lower price point for a Disney+ subscription versus the other streaming services. Disney+ is just $8 per month versus $12 to $15 per month for the other services. 

But investors that have paid attention to the streaming video-on-demand space for years should have confidence that there's still a lot of room to grow the domestic subscriber base.

A combination of factors

Netflix hit 40 million U.S. subscribers in the first quarter of 2015 when most subscribers were paying $8 or $9 per month. It's since seen several quarters with net additions of less than 1 million paid subscribers, including both Q2 and Q3 2015, and nearly every second and third quarter since.

Furthermore, we're exiting a unique period for home entertainment services like Disney+. Most analysts expect a temporary slowdown in subscriber growth. Netflix management, for example, provided an outlook for just 1 million global net subscriber additions in the second quarter. That's due to the pull-forward effect of 2020, potentially exacerbated by pent-up demand for out-of-home entertainment.

On top of that, Disney+ was a well-understood product before it even launched. As such, it ought to produce a lot of sign-ups early and a long tail of stragglers as it expands the product.

The point is that a severe slowdown in domestic subscriber growth for Disney+ isn't a huge concern. If the company posts modest results for its third and fourth quarters, that doesn't mean the days of adding subscribers are over. Netflix has consistently added more subscribers in nearly every quarter, and Disney can, too.

That said, it's not 2015 anymore. Streaming services are much more widespread than they were just six years ago, and investors may have expected Disney+ to grow bigger in the U.S. before showing any signs of slowing down.

Disney doesn't need to change a thing

Disney already plans to step up its content investment for Disney+. At last year's investor day, management shared plans to increase its content budget for Disney+ to between $8 billion and $9 billion by 2024. That's still much less than Netflix, but Disney's productions are consistently high value.

Moreover, Disney reorganized the company last year to provide greater flexibility for content distribution. If management feels the entire company could benefit from more content on Disney+, it's easy to make the shift from more theatrical or cable network releases. 

Keep in mind that Disney saw many of its original productions shut down during most of 2020. The original content slate will expand over time, and it should drive consistent net additions both domestically and abroad. The growth story of Disney+ is far from over.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.