What About Bob?

Greetings again from the land of Buffering, where we see the end of daylight saving time not as a tragedy but rather just an excuse to start streaming holiday movies a little earlier. This week’s newsletter kicks off with a look at why Disney’s very strong streaming subscriber numbers somehow prompted a massive drop in the company’s stock price, as well as my argument that Wall Street panicking doesn’t tell the full story. We’ve also got a look at Peacock’s new focus on live content. As always, thanks for reading. –Joe Adalian

Reach Joe on Twitter @tvmojoe or email buffering@vulture.com.


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When Disney+ launched three years ago this week, execs at the streamer laid out what at the time seemed an ambitious, though not unreasonable, goal of generating 60 to 90 million worldwide subscribers within five years. Turns out that target was entirely too modest: Disney Tuesday said its signature streamer netted an eye-popping 12.1 million sign-ups over the summer and now boasts a whopping 164.2 million paying customers around the globe. Things seem to be going great in the wonderful world of Disney streaming — and yet you’d never know it from the way Wall Street has been reacting.

Despite dramatically outperforming expectations on the subscriber front— analysts had been expecting about 8 million more sign-ups — Disney’s stock price dove 13 percent the day after it issued its boffo report. And over the last year, its shares have lost more than half their value. Given how obsessed investors have been with subscriber growth at media companies, you’d think they’d be overjoyed at how quickly Disney has established itself as a streaming superpower. But as CNBC’s Alex Sherman smartly pointed out Tuesday, Wall Street is just doing what Disney and its competitors have been asking of it over the last few months. “Media and entertainment executives are pushing investors to value their companies on profit and revenue instead of purely subscriber growth,” Sherman observed. “And those numbers weren’t kind to Disney this quarter.”

Indeed, ever since the Great Reset in streaming which took place earlier this year after Netflix’s growth slightly (and temporarily) reversed, the mantra from moguls at media-centric corporations like Disney has been that it no longer makes sense to focus on the potential profits a growing subscriber base hints at, but that instead the bottom line should be, well, the bottom line. So even though the company did a bang-up job getting people to sign up for its various streamers over the summer, Disney still lost nearly $1.5 billion on streaming during the last quarter — more than doubling its red ink from the same frame a year ago. Wall Street reacted accordingly.

Given that he himself has been calling for a shift in how to gauge success in streaming, Chapek probably had no choice this week but to hunker down and power through Wall Street’s freakout. And to his credit, at a Paley Center for Media event Wednesday, he didn’t try to just focus attention on the great subscriber growth numbers; he instead conceded it was no longer enough to promise shareholders a bright, shiny digital future. “Our investors expect us to have a return on that investment,” Chapek said, adding shareholders want to “make sure there is something there there.” And during a call with investors Tuesday, Chapek also predicted that the “there” is almost here, saying that — barring a major economic downturn — he still expects the company’s streaming units to start turning a profit by 2024, with its losses shrinking as soon as the current quarter. That’s not a surprising statement, given Disney is hiking prices for both Disney+ and Hulu this quarter and is rolling out advertising on Disney+, which could generate as much as $1 billion in revenue next year, according to some estimates.

Even if it’s making for some tough love from Wall Street, focusing on real results vs. projections is a logical shift now that streaming is a much more mature segment of the entertainment industry. It certainly makes sense for Netflix, which has been in the originals game for a decade; ditto Disney, which was the first legacy media company to go all-in on streaming. That said, while Disney’s streaming services are losing more money than investors had expected, if you look at how the Mouse House’s streamers are playing with consumers, their performance of late has still been pretty spectacular:

➽ Disney+ has added about 45 million subscribers over the past year even as most of its rivals have seen growth slow to a trickle. Yes, a lot of its gains have come in countries where the service is heavily discounted and the amount of revenue generated per subscriber is lower than what Netflix or HBO Max extract from consumers. But having a widely distributed platform means audiences are seeing the company’s content and building a relationship with the service. That’s half the battle in streaming.

➽ Following start-up delays and the COVID disruptions, the Disney+ programming pipeline is flowing at full speed. Instead of one or two tentpole original titles every quarter, the streamer is now bursting with activity. During the summer, it offered new content from its Disney, Marvel, Pixel, Star Wars, and National Geographic verticals — the first time all five brands have been represented by originals within a single quarter, Chapek said during his investor call Tuesday. Disney+ is also carving out a strong presence in the live TV space: Dancing with the Stars made the move from ABC to streaming without a hitch, and later this month, the streamer will let subscribers live stream Elton John’s farewell concert tour Dodger Stadium date.

➽ Disney+ shows aren’t simply debuting and disappearing, like so many streaming titles. Nielsen has reported strong viewing levels for recent series titles such as She-Hulk: Attorney at Law and Obi-Wan Kenobi, while last month’s straight-to-Disney+ debut of Hocus Pocus 2 generated what Nielsen says was the biggest opening weekend yet for a streaming movie. And while Nielsen results so far indicate the latest Star Wars series Andor isn’t quite as big a hit with audiences — it’s making the weekly top 10, but with smaller viewership — the show has generated strong reviews and steady social media buzz. Indeed, one of the most surprising things about the early years of Disney+ is how often its content has been embraced by critics. That’s not always the case with platforms focused on making blockbusters.

➽ Hulu has also had a stellar year. While subscriber growth has been modest — about 4 million new customers in the past 12 months — the streamer has dramatically upped the cadence of buzzy original shows, with Dopesick, The Dropout, Under the Banner of Heaven, The Girl from Plainville, Reboot, and How I Met Your Father all debuting since January. The streamer also continues to benefit from its relationship with Disney linear brands ABC (Abbott Elementary) and FX (The Bear, Reservation Dogs, The Patient, and the upcoming Fleishman is In Trouble), as well as from the recently-launched Onyx Collective (Reasonable Doubt). And Disney also continues to put more high-profile feature films directly on Hulu, including the well-received Prey and Fire Island.

Of course, there are still some major challenges ahead for Disney+. The streamer is about to ask subscribers to pay nearly 40% more per month to continue with the current ad-free status quo, hiking the price in the U.S. to $10.99 per month (vs. $7.99 now and $6.99 at launch). At the same time, millions of die-hard Disney fans are about to get some major sticker shock: Anyone who locked in three years of Disney+ at a substantial discount — roughly $4 per month — before the service launched will soon see that deal expire. Disney execs told investors Tuesday that they don’t think the price hike will result in a significant amount of churn, but that sure seems optimistic given the inflationary pressures so many consumers are facing.

Disney+ is smartly raising prices right around the same time it is introducing a new ad-supported tier, one whose cost — $7.99 per month — not-so-coincidentally matches that of the current ad-free plan. In theory, this means anyone who’s sensitive to shelling out another $36 per year for the streamer can simply downgrade to the new “basic” tier and just accept a few minutes of commercials for no change in fee. Disney is actually hoping plenty of its subscribers do exactly that, since it needs to start generating significant revenue from advertising on Disney+, and that won’t happen if not many people change to the lower tier. But even if they don’t, Disney hopes the price increase for Disney+ — and well as last month’s Hulu hike — will at least get more of its customers to opt into the Disney Bundle. The key to getting average streaming revenue per subscriber up is converting as many folks into users of all three major services, and the bundle is the most effective way of doing that.

There’s also one big question looming over both Disney+ and Hulu: Is Disney going to eventually combine the two services for U.S. customers? Right now, that can’t happen because Comcast has a silent ownership stake in Hulu, and while Comcast and Disney have both indicated they’re open to Disney taking full control of the service, nothing has happened yet. (That might change in 2024, when Comcast will legally be able to force Disney to buy out its stake per a deal signed in 2019). But assuming all that gets settled, it wouldn’t be shocking for more Disney+/Hulu integration to happen: In much of the world, Hulu originals and adult-skewing shows and movies from the Disney/20th Century Fox libraries are included under the “Star” tab on Disney+.

For now, though, Disney seems to be doing pretty well with its current bundle strategy, as well as its overall approach to streaming. Yes, the financial losses to date have been significant, but assuming millions of current users don’t bail as a result of the price increases, the company’s red ink problem will likely get a lot better in early 2023 as higher fees combine with advertising sales to significantly improve revenue. Wall Street’s skepticism might take a while longer to overcome, of course, and the overall streaming business model will continue to evolve as the ripple effects of the Netflix Reset continue. But there’s no reason to think Disney still isn’t well-positioned to emerge a winner in whatever the next phase of the streaming wars brings.

Peacock may be owned by the nation’s biggest cable company (Comcast), but the streamer seems to be working overtime to give consumers an excuse to cut the cord. Last week, just in time for Christmas movie season, the streamer began offering paying customers access to the live feeds of all three Hallmark networks, as well as a small library of on-demand titles from the Hallmark universe. And this week, Peacock said it had started rolling out live feeds of NBC-owned stations and affiliates to subscribers on its $10 Premium Plus tier, allowing its best customers to watch local news, NBC primetime programming, and Sunday NFL games at no additional cost. The new feature has had a soft launch in several cities already — I was able to stream my local NBC station last night — and will be up and running everywhere by month’s end.

The affiliate deal is a massive (and long-overdue) no-brainer for Peacock, given the importance of NBC programming to the Peacock brand. Paramount+ has offered live feed capability since the service launched in 2014 as CBS All Access, and it’s not hard to understand why. A big linear network that reaches nearly 90% of all U.S. homes and offers local news and sports is one of the few things companies like Comcast and Paramount Global have that their deep-pocketed tech rivals don’t. And while the linear TV ecosystem is shrinking quickly, millions of viewers still enjoy being able to enjoy a lean-back channel-centric experience, or watching the 11 o’clock before they go to bed, or, you know, a little thing called Sunday Night Football. Live broadcast network feeds let Paramount+ and Peacock differentiate themselves from the streaming pack, and offer a lower-cost option to cord cutters who don’t wanna shell out the $50-plus required for services such as YouTube TV or Hulu with Live TV.

But if adding NBC feeds was a super obvious play for Peacock, the deal with Hallmark qualifies as perhaps the smartest thing the streamer has done since launch. Overnight, Peacock associated itself with one of the strongest brands in television, and one which boasts an extremely passionate and loyal audience. Anyone who had been holding on to a cable subscription mostly because they wanted access to Hallmark can now switch to Peacock and pay a whole lot less per month and get the exact same experience. (If they pay for Peacock Premium Plus, they can even upgrade, since movies are available on-demand without any advertising, something not available to cable customers.) Hallmark audiences also tend to check in with the network pretty frequently: They’ve been trained to expect new movie titles every weekend, or 24/7 marathons during holiday periods. That could prove very beneficial to Peacock, since every time subscribers open the app, it increases the odds they’ll find something else on the platform to enjoy. Five-days-per-week soap opera Days of Our Lives, which moved from NBC to Peacock in September, serves a similar function.

As I wrote a few weeks ago, Peacock has not been performing nearly as well for Comcast as the company needs. Subscriber growth has been steady but not strong enough; its original content has won some critical praise (at least on the comedy front) but hasn’t fully connected with audiences. There are still good reasons to worry about what’s next for Peacock, but announcements like the affiliate and Hallmark deals — as well as the amazing trailer for Natasha Lyonne’s upcoming mystery series Poker Face, which is giving serious Columbo vibes— also offer reasons for hope.

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