Disney's video streaming bundle of Disney+, ESPN+ and Hulu isn't as popular as expected
A filmed production of the Tony-winning Broadway musical "Hamilton," starring Lin-Manuel Miranda as Alexander Hamilton, debuts on Disney+ July 3. USA TODAY
Consumers are signing up for Disney+ and Hulu but not ESPN+.
When CivicScience. But around six months after launching, just 7% of consumers actually followed through and subscribed.
Interestingly, there seems to be a disconnect somewhere. Forty percent of Hulu subscribers also subscribe to Disney+, but just 14% of those same respondents say they're subscribed to ESPN+ as well. That's odd because a lot more Hulu subscribers surveyed could also be getting ESPN+ for almost no extra cost.
Disney isn't just offering a discounted bundle out of the kindness of its hearts. The company wants consumers to subscribe to the bundle because it'll improve its advertising business. Underutilization of the bundle is a problem Disney should be working to solve.
Streaming video: 30 million North American subscribers.
In other words, ESPN+ should be closer to the high-end of Disney's range -- 12 million. That's a significant shortfall, perhaps due to poor bundling reception.
It might just be ESPN+'s relatively low popularity is due to the current environment. Without much in the way of sporting events right now, consumers may not see the point of ESPN+. Still, consumer habits are hard to change. If they didn't sign up for the bundle when they first saw the option, Disney may have a hard time convincing them to change their subscriptions.
The value of the bundle for Disney
The bundle provides Disney with a couple of key advertising advantages. In its most straightforward manner, bundling ESPN+ should increase the amount of time spent with ad-supported content. More advertising opportunities means more revenue. Disney generates significant amounts of revenue per hour streamed on Hulu, as seen in its average revenue per user that's actually higher than its ad-free subscription price.
More importantly, the bundle will connect account-viewing data, so Disney can gain better insight into how customers respond to ad placements across its properties, including ESPN.com and its TV Everywhere apps. Viewing information from Disney+ could also inform advertisements in the ad-supported channels. (A Disney+ subscriber watching clips of Frozen a few times per week probably has kids.)
Importantly, the incremental cost of merely offering ESPN+ on top of Disney+ and Hulu is practically nothing. And delivery costs when subscribers do decide to stream ESPN+ are more than offset by advertising revenue.
While ESPN+ has benefited greatly from the bundle, it's underperforming its sister streamers at the media company. As sports return, look for Disney to increase its push for subscribers to take the bundle in order to support its digital advertising business.
Adam Levy owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short July 2020 $115 calls on Walt Disney. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
Offer from the Motley Fool: 10 stocks we like better than Walt Disney
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walt Disney wasn't one of them! That's right -- they think these 10 stocks are even better buys.