After 5 years, Disney+ stakes its streaming future on sports and ads

Disney+ looks a lot different now than it did five years ago.

When the platform launched on Nov. 12, 2019, there was no Hulu tile. There were no ads. The app’s color scheme was closer to the classic Disney blue than the teal Disney-Hulu amalgamation it is now. If Disney’s earnings report on Thursday is any indication, more changes are coming, including an ESPN+ hub on Disney+ next month.

Of course, it’s all in the service of growth. Disney’s direct-to-consumer (DTC) business is profitable as of Q2 2024, ahead of schedule. On Thursday, the company said that DTC profit improved again in the most recent quarter, ad revenue grew 14% and Disney+ added over 4 million subscribers.

The company is optimistic about its streaming future, saying that it expects the business to generate $1 billion in operating profit in 2025, which helped juice the stock on Thursday morning.

To sustain its DTC momentum into next year and beyond, Disney pointed to the growth of its ads business and the potential draw of its live sports content. It’s a common strategy throughout the streaming industry right now, as more and more live sports media rights, and ad inventory, shift that way. Disney, though, could be uniquely positioned in this regard compared to fellow legacy media companies, as it navigates ESPN into a streaming-centric future and builds Disney+ into a one-stop shop for its entire DTC business. Advertisers can expect a well-rounded programming slate to choose from, including highly coveted live sports slots.

“Live [TV] is extremely, extremely attractive to advertisers today, and live sports in particular,” Disney CEO Bob Iger said on Thursday’s call with investors.

Disney’s ‘super product’

Disney has taken steps to diversify Disney+’s content offering beyond the core Disney brands over the last five years, including by introducing the Hulu hub earlier this year after a beta period. It could give Disney an advantage in the streaming space.

“Rolling Hulu into Disney+ has helped turn the platform into a true four-quadrant service,” says Wade Payson-Denney, communications manager at Parrot Analytics.

“Hulu series typically draw an older and more female audience, while Disney+ originals cater toward younger male audiences. Combining these catalogs, and their respective audiences, makes Disney+ more appealing to both consumers and advertisers.”

Next up is the ESPN+ tile ahead of the stand-alone ESPN streaming product in late 2025. Subscribers to both Disney+ and the ESPN service will be able to access both in the Disney+ app.

“Of the legacy companies, Disney has the best hand because it has Hulu, Disney+, ESPN+,” analyst Michael Nathanson told Yale Insights earlier this year. “They have great content. What they’re trying to do now is put it all together to create a super product, which I think is going to work.”

All in on ads

Disney’s streaming success reflects a larger industry trend this year, in which other media companies have either narrowed their streaming losses or posted a profit amid a focus on advertising, bundling, and other revenue drivers like price increases and password-sharing crackdowns.

According to Bloomberg, the five major Hollywood platforms — Disney+, Hulu, Peacock, Paramount+ and Max — generated a combined $3.2 billion in profit in the first half of this year. One thing they all have in common: Offering viewers a lower-cost ad-supported plan option now.

Disney says that over half of new Disney+ subscribers are choosing the ad tier, which debuted in December 2022. On Thursday’s call, Iger disclosed that 37% of subscribers in the U.S., and 30% globally, are currently on the ad plan.

Iger added that recent streaming price increases were “designed to move more people in the AVOD [ad-supported video on demand] direction because we know that the ARPU [average revenue per user], and the interest from advertisers in streaming, has grown.”