Disney chief executive Bob Iger admitted that the company’s streaming platform Disney+ is still lagging behind the industry’s “gold standard” Netflix, nearly five years after its debut.
Iger made the comments and laid out his plan to catch up to the original video streaming platform at a talk Tuesday at the Morgan Stanley Technology, Media and Telecom Conference. Iger’s plan includes updating the platform’s tech, reorganizing its leadership structure, and combining Disney+ and Hulu into one app experience.
He said that a primary reason Disney+ has failed to outperform its rival is because its tech is not on par with Netflix’s at keeping consumers engaged and subscribed.
“We’re now in the process of creating and developing all of that technology,” Iger said at the conference. “And obviously, the gold standard there is Netflix. We need to be at their level in terms of technology capability.”
He added, that this technology gap has resulted in Disney spending more money on marketing to attract new subscribers than Netflix does.
“One of the reasons why their margins are so much more significant than ours is because they have that technology,” Iger explained. “So, our marketing expenses are significantly higher, our churn rates are higher than they need to be.”
In addition to improving its tech, Iger said the company has put Disney+ under a new management structure. In 2023, Iger appointed Alan Bergman and Dana Walden as heads of the company’s new entertainment unit that oversees streaming as well as TV and film content creation.
“That’s really important when it comes to streaming because streaming is a path to them monetizing what they make in a much more efficient, much more effective way,” Iger said of the restructure.
Finally, Iger suggested that merging Disney+ and Hulu, which the company took over in 2019, will help increase viewer engagement. The company started testing this merged service in December.
“In bundling Hulu with Disney+, we’re finding wherever we bundle churn rates are down significantly. So, that’s a path to profitability,” Iger said.
Disney+ and Hulu has a retention problem
Iger’s plan comes as all video streaming services are struggling with growing churn rates.
In the last four years, the weighted average churn rate for U.S. streamers has almost tripled to 5.5%, according to a report from the streaming analytics firm Antenna. In 2023, that meant that, although streamers gained 164.7 million gross subscriptions, they also recorded 140 million cancellations, leaving them with a net of 24.2 million new subscriptions.
Disney+ and Hulu are the platforms who have been hit the hardest.
Disney+ and Hulu finished 2023 with a paid subscription loss. Subscribers to Disney+ fell 7% to 150 million in the three months ending Dec. 30, from 160 million, while Hulu’s subscribers in the fourth quarter fell 3% to 48 million. For comparison, Netflix and Spotify gained subscribers in 2023. Paid subscribers to Netflix and Spotify both grew 13% in the fourth quarter to about 260 million and 236 million, respectively.