Drop in Disney+’s Q1 earnings – big lessons to be learnt!

Disney+’s Q1 earnings are not good.

The company reported a drop of 2.4 million subs from 164.2 million the previous quarter. This is the streamer’s first subscriber loss since their launch in 2019.

The main reason for this is a drop in Disney+ Hotstar subscribers. The plan was to beat arch rival Netflix and they upped their ante with more appetizing offerings but at a price – the Disney+ ad-free subscription plan went up to $11 per month in tandem with its new $7.99 ad-supported tier. The increase in rates made analysts expect a bigger drop in subscriber numbers so this is not entirely bad news.

Another major reason for this is consumers cutting back on spending in a recession-headed post-pandemic era.

As a reaction to this drop in earnings and subscribers, the company plans a significant re-structuring, including lay-offs.

Disney’s other streaming services are thriving though – Hulu and ESPN+ - with an increase in subscribers for both.

And the overall earnings for Disney showed an increase.

What Disney is doing about this

Disney announced that they were going to look at the volume of content it generates along with the pricing. Laying off 7000 employees, Disney has said that it would dial back its aggressive global race for subscribers and scale down its rather fierce promotions.

It happened to a giant like Disney. That leaves just about every other OTT player or any other brand that struggles to keep the numbers of subscribers high, vulnerable too.

Why do businesses lay off employees when their revenues go down? It is obviously to stay profitable. But this might be a short-term boost to revenues and not really a great solution in the long term.

On the other hand, we would have loved to see in the report, what Disney has planned to arrest subscriber churn.

May be they are already doing a lot and are still losing subscribers.

But what if the same thing happens to a big, but a not-so-big OTT player?

In such a scenario, prevention is, as always, better than a cure. Subscribers don’t unsubscribe / churn overnight. There will be a series of experiences that would have made them take the eventual decision. Fortunately for brands, the impact of those would be explicitly visible in reports like Daily Active Users, Monthly Active Users, Day X retention etc.

All such OTT players need to do is track those metrics and proactively run retention campaigns to keep their audiences hooked – maybe give them an extended subscription or something. Any money spent on such things can be easily got back through their future subscription and this is definitely a better place to be in than, losing out on subscribers.

We are sure OTT players invest a lot in analytics that recommend the right type of content for each subscriber. But trust us. It may get the subscribers hooked for some time. But, it won’t do much in terms of retaining them.

But when they extend their analytics capability to cover the metrics we talked about earlier, they can not only identify potential churn, but can also act on it before it happens.

The truth is - each subscriber retained is several subscribers acquired.