Walt Disney (DIS +0.50%) ended its first quarter with nearly 130 million subscribers, adding 11.8 million new subscribers over the period. Analysts were expecting Disney to end the quarter with 125.4 million on average. The subscriber growth is a stark turnaround from the 2.1 million it added in the fourth quarter, and it compares well with Netflix's (NFLX 0.71%) 8.3 million net adds during the same period.
Disney also broke out its results by region for the first time, giving investors a more detailed look at how it's performing around the globe. Here's what investors need to know about how it beat expectations.
Characters from the Disney+ series "The Book of Boba Fett." Image source: Walt Disney.
Disney+ Hotstar returns to growth
A big drag on growth in Disney's fourth quarter was a decline in Disney+ Hotstar subscribers. The Indian Premier League cricket season was suspended for most of the quarter, resuming at the end of September. Combined with a new law that requires subscribers to opt into renewing their subscriptions, many cricket fans chose not to renew their subscriptions right away.
The streaming service lost about 1.9 million subscribers in the fourth quarter. But that number bounced back in the first quarter, up 2.6 million.
The growth of Disney+ Hotstar is an important barometer for Disney. It expects the streaming service to account for 30% to 40% of its global subscribers in 2024, for which it has an outlook for 230 million to 260 million total subscribers. It accounted for 35% of subscribers at the end of the first quarter with 45.9 million total.
Hulu adds bundled subscribers
Disney added 4.1 million subscribers in the U.S. and Canada, reaching 42.9 million total. About 2 million of those subscribers came from the new bundled subscription with Hulu + Live TV.
The good news is the bundle (and price increase that came with it) appears to be working to grow both Disney+ and Hulu + Live TV subscribers. It counted 300,000 more live TV subscribers at the end of the quarter than three months earlier, after a year of treading water.
Investors should expect slower growth going forward after the one-time bump, but with less than 60% of the subscribers in the U.S. and Canada as Netflix, there may be a lot of growth left.
Asia and Europe contribute
A total of 5.1 million new subscribers signed up in international markets excluding Disney+ Hotstar. CFO Christine McCarthy attributed much of the growth to Europe and Asia, where it launched in several new markets during the quarter, during the first quarter earnings call.
One of the more impressive metrics among Disney's new disclosures is that international subscribers (excluding Disney+ Hotstar) generate an average revenue per subscriber equal to about 90% of its domestic subscribers. By comparison, Netflix's international ARPU is closer to 70% to 75% of its domestic ARPU on average.
The higher ARPU ratio in international markets reflects its decision to include Star as a sixth tile in many markets. But it appears to be paying off with strong subscriber growth in Asia and Europe.
One region that isn't growing as quickly is Latin America. Disney delayed the launch of its Star-branded service in the region and it's heavily reliant on partnerships to grow in the market. As it gets Star+ off the ground, it should start to gain traction, as the sports content on the service is a big reason people are signing up in the region. For reference, Netflix has 40 million subscribers in Latin America, so it represents a sizable opportunity for streaming services.
The future
Disney is planning to step up its content spend, including a big push with more international content as it expands to even more markets. That should allow it to continue growing in 2022, pushing toward its goal of 230 million to 260 million subscribers. Much of that growth will come from international markets, but revenue per subscriber remains relatively strong in those markets. That said, all regions have growth potential, and last quarter's results should give Disney investors confidence in its long-term outlook.
