Walt Disney (DIS 0.18%) has become a streaming media powerhouse over the last couple years since launching Disney+. The streaming service is now the third most popular in the United States, according to estimates from Parks Associates. That's a remarkable milestone, considering the top three streaming services haven't changed since the research group started tracking "over the top" (OTT) streaming services in 2015.
The questions for Disney investors, though, are: How much more can Disney grow? And can it find the same level of success in other countries?
Image source: Walt Disney.
More than 44 million U.S. subscribers
Disney ended September with nearly 44 million Hulu subscribers. So, Parks Associates' data implies there are more than 44 million Disney+ subscribers in the United States.
That's very impressive growth for a streaming service that's just two years old, but growth has certainly slowed down over the last few months. Disney+ had fewer than 40 million domestic subscribers in February, according to internal documents seen by tech-news site The Information, so Disney may have only added a few million subscribers in the U.S. since the start of the year.
That slowdown in growth isn't totally unexpected. Analysts foresaw lots of early sign-ups for Disney+, but a steep leveling off after the initial burst. Adding a few million more domestic subscribers per year puts Disney+ in line with Netflix's (NFLX -3.92%) historic domestic growth.
Netflix had just under 40 million U.S. subscribers at the start of 2015. By the end of that year it had slightly fewer than 45 million. That said, streaming video adoption in 2015 wasn't at the same level as it is today. But if Disney can echo Netflix's growth over the next three years, it could have about 60 million domestic subscribers by the end of 2024, when it expects to have between 230 million and 260 million subscribers globally.
In order to reach those numbers, though, Disney will need to improve adoption in international markets.
Two markets dominate Disney+ subscriptions
Disney+ subscriptions are heavily concentrated in the United States and India. CFO Christine McCarthy said during Disney's fourth-quarter earnings call that Disney+ Hotstar -- the low-priced version of the service in South Asia -- accounts for 37% of global Disney+ subscribers. That's about 44 million subscribers, roughly equal with its U.S. subscriber base.
In other words, the U.S. and South Asia account for around three-quarters of all Disney+ subscribers. Meanwhile, Canada, Europe, Latin America, and the rest of the Asia-Pacific region contribute just 30 million subscribers. For reference, Netflix had well over 100 million more subscribers than Disney+ in those regions as of the end of the third quarter. (Netflix, notably, has struggled to win subscribers in India.)
Netflix may show the potential for Disney in those regions, but in order to get there, Disney will need to invest in as much content as Netflix has. While Disney's films have global appeal, subscribers generally sign up for a new streaming service for its original series.
To that end, Disney is well on its way. After some delays, it finally launched Star+ in Latin America at the end of August. The service, which subscribers can bundle with Disney+ for a small additional charge, includes originals produced throughout Latin America.
Likewise, Disney began production on 10 series produced in Europe earlier this year. It now has 21 series green-lit for production throughout Europe.
Meanwhile, Disney plans to increase its content budget by $8 billion in 2022, with the bulk of that spending going toward original streaming titles. That should help fuel subscriber growth in the markets where Disney lags the most, while also supplementing its content catalog in the U.S. and South Asia.
