It’s getting tougher for the streaming giants. In search of profitability for its various platforms, including Disney + which lost subscribers for the first time in its history since 2019, Disney announced on Wednesday February 8 the layoff of 7,000 people. Disney+ now has 161.8 million subscribers worldwide, after losing 2.4 million in the last three months of 2022.
“Its meteoric rise is considered one of the most successful deployments in the history of the media”, nevertheless welcomed Bob Iger, who launched the service before giving way to Bob Chapek in 2020, after fifteen years at the helm.
Disney asked him in November to return to his duties, in particular to tackle the problems of profitability of the platforms. “It’s time to complete another transformation, to streamline our formidable streaming business and put it on the path to sustainable growth and profitability,” detailed Bob Iger, referring to the need to “cut costs” and “to improve the margins”, before announcing the social plan. According to its 2021 annual report, the American group employed 190,000 people worldwide that year, 80% of them full-time.
The market welcomed Disney’s financial performance for the October-December period, released in a statement on Wednesday. The enchanted kingdom achieved a quarterly turnover of 23.5 billion dollars, better than expected by analysts.
Above all, the operational losses of its streaming platforms (Disney +, ESPN + and Hulu) came out lower than expected, at one billion dollars. The group is aiming for profitability for Disney + in 2024. Something to reassure investors: Disney shares took off up to 8%, before stabilizing at 6% during electronic trading after the closing of the New York Stock Exchange.
Streaming platforms experienced blazing growth for years, further amplified by the Covid-19 pandemic, before being overtaken by the economic crisis and frantic competition for audience attention. “Subscriber growth will not be linear each quarter,” warned Christine McCarthy, Disney’s chief financial officer, in November, when the star platform had just gained 12 million subscribers in one quarter.
Netflix, the industry veteran and leader, had a tough first half of 2022 losing nearly 1.2 million subscribers, before bouncing back this fall and winter. If the platform has more than 230 million paying subscribers, its annual net profit fell by 12%, to 4.5 billion. Streaming applications make the same observation as social networks like Snapchat, Facebook or Instagram: gains in users no longer automatically translate into financial gains.
Netflix and Disney therefore launched new, cheaper subscriptions in December, with advertising, to attract even more viewers and above all to diversify their sources of income. Disney + took the opportunity to increase its prices, to 10.99 dollars per month in the United States for its basic subscription without advertising, against 7.99 dollars per month with advertising.
“In our zeal to woo viewers, I think we’ve gone too far,” remarked Bob Iger, referring to prices that were too low before. He reiterated that streaming was “the future”, and Disney’s “number one priority”, but clarified that he was not going to abandon TV channels and cinemas “as long as they remain beneficial to us and our shareholders”. The iconic boss also mentioned the “unprecedented power” that the age of platforms gives consumers, who can subscribe to see a program “for a very small fee” and easily unsubscribe afterwards.
Building on their success, the platforms seem to be trying to regain control after years of laxity, Netflix in the lead. On Wednesday, the industry pioneer launched a campaign to prevent its subscribers from sharing their credentials beyond the home in Canada, New Zealand, Portugal and Spain. In these countries, it will now cost a few extra dollars to add users who do not live under the same roof.
