While the 73.7 million subscribers for Disney Plus drew most of the attention when The Walt Disney Co. announced its fourth-quarter results, the company also said that its Hulu Plus Live TV virtual MVPD increased its subscribers by 27% to 4.1 million.
Observers including Brian Wieser of GroupM noted that Disney is now the fifth-largest US-based pay TV service provider, ahead of Verizon, which ended the calendar third quarter with only 3.9 million subscribers.
Cord-cutting and other factors have been whittling down the number of subscribers at Comcast, DirecTV, Charter and Dish, which remain ahead of Disney.
“Of course, the economics of a vMVPD are not as favorable as a traditional provider given the limited number of bundling opportunities and higher operating cost structure, but the scale of the relatively new operation is remarkable nonetheless,” Wieser noted.
Similarly, analyst Michael Nathanson of MoffettNathanson Research noted that by adding 700,000 subscribers sequentially since the last quarter--despite a $10 a month price increase--Hulu Plus Live TV is now the largest vMVPD platform in the U.S.
Nathanson called the Hulu Plus Live TV performance a bright spot, but said that might be a mixed blessing. “Given the high and ever-rising variable cost of programming, we see these businesses as low margin endeavors that probably should not be valued using a Netflix multiple,” he said.
Disney has pivoted its media assets into streaming and direct-to-consumer. And being in the vMVPD business puts Disney in an interesting spot, needing good relations with other programmers as well as with its traditional distribution partners who control most of the broadband pipes into subscribers’ homes.
Many of those distributors are shifting their efforts towards the high-margin broadband business and are less concerned about their video customer losses--some of whom are becoming Hulu Plus Live TV subscribers.
Disney is also heavily invested in the sports business, with ESPN in particular, and Hulu Plus Live TV may help be a bridge between cord cutting and keeping sports fans as pay TV subscribers. The company has been promoting the vMVPD with the slogan “Hulu has live sports” and commercial featuring athletes including Baker Mayfield and Joel Embiid.
Disney CEO Bob Chapek was asked about reaching sports viewers and the vMVPD business was a part of his answer.
“We've got a product we're really excited about and has experienced some rapid growth, and that is Hulu plus live TV,” He said. “I think this will increasingly act as a solution to those households that have walked away from their traditional more traditional cable type subscriptions, and potentially slide it over to Hulu Plus live TV."
Chapek said that’s why the company is bullish on Hulu Plus Live TV.
“I'm a personal big fan of it, I use it, and it's really slick, it's very elegant, and it really is a big solution provider. It is really the complete solution, I think. We're excited about that in terms of solving a consumer need, for those consumers, as you mentioned that have walked away from that particular way of distributing content,” he said.
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