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Disney direct-to-consumer revenues rise as losses shrink

Fueled by subscriber gains across its various streaming properties, The Walt Disney Company's overall direct-to-consumer business showed more signs of improvement in fiscal Q3 2021 thanks to surging revenues paired with reduced losses.

Disney's DTC business pulled in Q3 revenues of $4.25 billion, up 57% from $2.71 billion in the year-ago quarter. The DTC unit swung to a loss of $293 million, improved from a year-ago loss of $624 million. Disney attributed the reduced DTC losses on improved results at Hulu, partially offset by a higher loss at Disney+ driven by higher costs for content, marketing and technology.

DTC is Disney's "top priority," Disney CEO Bob Chapek said on the call.

Even as the fundamental economics of Disney's DTC business improved in the quarter, gains at its individual streaming services continued to come down to Earth following spikes driven by the earlier stages of the pandemic.

Disney+ ended the period with 116 million subs worldwide, compared to 57.5 million in the year-ago period. Disney+ tacked on 12.4 million subs in Q3, about 3.2 million more than analyst expectations. Chapek noted that Disney+'s launch in eastern Europe has been delayed from late 2021 to summer 2022 in part to account to a broader rollout initiative focused on the Middle East and Africa. Meanwhile, Disney+ is moving ahead with a full market launch in Japan later this year following a soft launch with a partner in 2020.

Disney+'s average revenue per user (ARPU) dropped 10%, to $4.16, reflecting a higher mix of Disney+ Hotstar subs in India, Malaysia and Thailand. Disney+ Hotstar's ARPU is lower than that of Disney+'s streaming service in other markets.

Update: Execs also dropped some hints around "Disney+ Day," which will take place this November 12, and arrive two years after the 2019 debut of the premium streaming service. Disney hasn't announced the specifics, but Chapek hinted that the promotion/subscriber acquisition campaign will feature a lineup of fresh content in the US and international markets.

Hulu's SVoD-only streaming service tacked on 1.3 million subs, for a total of 39.1 million. Hulu's SVoD + Live TV service added just 100,000 subs in the quarter, extending its total to 3.7 million, up by just 300,000 from the year ago period. Hulu ended with a total subscriber base of 42.18 million, up 1.2 million for the quarter, and up from 35.5 million a year ago.

ARPU at Hulu's SVoD service rose 15%, to $13.15, aided by a rise in advertising revenue and a lower mix of subs coming through the wholesale channel. ARPU at Hulu's SVoD + Live TV service climbed 23%, to $84.09, thanks largely to a blend of price increases and a rise in per-subscriber advertising revenue and feature add-on revenue.

"Hulu exceeded expectations and it was profitable this quarter," thanks to solid sub growth and strong advertising revenues, Christine McCarthy, Disney's senior EVP and CFO, said. With respect to advertising on Hulu, McCarthy said growth was driven by higher impressions and rates, and helped by dynamic ad insertion capabilities on the Hulu live TV service.

ESPN+ added 1.1 million subs in Q3, ending with 14.9 million, up 75% from the year-ago quarter. ESPN+'s ARPU rose 7%, to $4.47.

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— Jeff Baumgartner, Senior Editor, Light Reading

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