Where Disney Plus is Headed- Hulu and the Streaming War
Part 3 of the four-part series, Diversification as Business Strategy.
Last time we talked about the “How”- namely how Disney & streaming segment self-branded Disney+ achieved strategic goals- by focusing on the strategic assets, as well as assessing acquisition or diversification leverages to increase ways of (television) distribution, reaching the mass consumers.
1.Business outlook (streaming segment)
Disney now has full control over Hulu. Hulu is a platform that targets more mature audience. An examination into Disney’s direct-to-customer segment performance shows that, overall
Disney’s self-branded platform Disney+ is majorly driven by large increase in subscribers (upper section of the chart), despite being slightly offset by decrease in average monthly revenue per subscriber. (link to Disney quarterly report)
In comparison, although Hulu’s ARPU performance is consistent for the most part, compared to its last quarter. Its rate of increase in subscribers has just been slightly better.
It may be argued though that Hulu has the appeal of quality customer retention, with retention rate at 67% after one month- falling behind to Disney+ and Netflix only.
As Disney+ is performing strongly, and strong IPs such as Marvel productions are being moved to the platform also, it brings the question of where Hulu fits within Disney’s direct-to-customer business.
Disney’s own streaming brand Disney+ has performed well earlier this year, majorly driven by large increase in subscribers, despite slightly offset by decrease in ARPU.
2. Has Hulu fulfilled its part under Disney’s strategy? Was it a good strategy?
- Currently the competitive landscape for on-demand streaming is very saturated. I suppose before making any major decision to merge Hulu, the decision makers at Disney would want to look at how how good of a trade-off it is.
- Taking a step back to compare Disney’s current and past acquisitions- Hulu & ABC networks.
ABC acquisition occurred about two decades ago, when on demand streaming game hadn’t come on the scene. It was a necessity for Disney to find ways to more distribution channel, and to prioritize the scheduling for their products.
Hulu however exists at an risky age where options are not limited- for consumers neither for Disney as a buyer. Every competitive player wants to be part of the streaming market (Amazon, Netflix upping its game too), and that the booming of streaming services may be coming to an end. Adding on to that- Disney+ is doing quite well on its own.
All that points to whether or not Hulu is necessary in Disney’s strategic expansion? - The answer to Hulu’s future may still be positive though- Hulu has a successfully run advertising business, and more importantly a separate channel outlet for Disney to stream its mature-audience oriented works.
And the latter reason alone I’d say defines Hulu’s future.
Because Disney cares a lot about the brand. Despite its company growth and growth on ecosystem, it never compromises or dilutes its brand (check out the book Good Strategy Bad Strategy for more details). Without Hulu, Disney still has to find another outlet to broadcast its “edgier” content, or market it under other brands
If however Disney+ undergoes some transition to extend the brand and finds way to launch all its variety/categories of IPs under its own brandname. That’s an entirely awkward story for Hulu.
Right now, I am positive Disney will follow through to integrate Hulu as part of their journey to taking the crown from Netflix. For that to happen, they will also be looking to acquire subscribers at speed, due to having lower ARPU, and having the Disney+ revenues are offset by the cost of productions and programming. Disney has to continue doing what it does best-deliver great products or programmings to consumer’s homes, but to find a way to bring down costs.
Finally, on the next post. I will conclude the series by presenting to you “What” goals Disney might continue to achieve under the current diversification strategy.
References
Disney and Hulu’s customer retention https://secondmeasure.com/datapoints/disney-takes-customer-retention-crown-from-netflix/
Disney Chief Strategy Officer on their streaming services
https://deadline.com/2018/02/disney-streaming-service-kevin-mayer-netflix-hulu-1202287731/
Is Disney giving up on Hulu
https://www.fool.com/investing/2020/08/09/is-walt-disney-giving-up-on-hulu.aspx
