Netflix (NASDAQ:NFLX) and Walt Disney (NYSE:DIS) are the two biggest players in the worldwide streaming content market. The same factors that affect subscriber growth for one sometimes affect subscriber growth for the other as well.
That suggests you can get some clues on Disney‘s upcoming update on subscriber figures (when it reports third-quarter earnings) from Netflix‘s earnings report. In fact, Netflix‘s management said something interesting that suggests subscriber growth is coming for Disney.
There was a surge in coronavirus cases in India
During Netflix‘s conference call accompanying its earnings release, CFO Spencer Neumann said:
The one thing we do see with COVID is we don’t see the big spikes that we saw in terms of engagement or acquisition or churn that we saw in the very early days of the pandemic. But on the margin, acquisition is impacted. So, for example, in Q2, when things tightened up a little bit, say, in Brazil or India, we did see some increase in acquisition.
Indeed, Netflix added a total of 1.54 million subscribers in the quarter, and 1.04 million were from the Asia Pacific segment. In other words, the surge in coronavirus cases in India during the quarter led to an increase in subscriber growth at Netflix. How does that help Disney? Because almost 33% of Disney+ subscribers come from the region. If demand for streaming services increased, some people likely chose to sign up for Disney+.
However, this is not a certainty. In fact, one of the main reasons why Disney+ is so popular in India and the region is because it carries the Indian Premier League, which was canceled because of elevating COVID-19 infection in India. The cancellation of the league could have an offsetting impact on subscriber growth even if there were a surge in demand as folks stayed home to avoid infection.
Thankfully, the surge of infection has decreased, and the Indian government has ramped up its vaccination efforts. Nearly 4 million doses of vaccine are being administered daily. At that rate, it would take 13 months to vaccinate 75% of the population.
What this could mean for investors
Interestingly, subscribers from India bring in lower average revenue per month compared to members from the rest of the world. In fact, the average revenue per user (ARPU) from Disney+ was $3.99 in the most recent quarter. Excluding Disney+ Hot Star, which is what the service is called in India, ARPU was $5.61. ARPU in the region is likely to be lower because of the lack of ad revenue generated from the IPL.
While it may have increased demand for streaming services overall, the impact of the latest COVID-19 surge is likely to be muted for Disney+, even if it does bring in more subscribers. Still, the growth in Disney+ has been a remarkable success, and fluctuations from quarter to quarter are to be expected.
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