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ESPN+ nets 4.2 million subscriber gain, higher per-customer revenue in fiscal Q1

Perhaps lost amid the focus on the subscriber gains charted by Disney+ was growth at ESPN+ during the first quarter of its parent's fiscal 2022.

Walt Disney Co.'s U.S. sports-centric streaming service finished the period ended Jan. 1 with 21.3 million subscribers, a 4.2 million sequential advance from the 17.1 million customers it counted at the close of the final quarter of fiscal 2021, and a 76% jump from 12.1 million during the year-earlier period.

On the company's fourth-quarter fiscal 2021 earnings call, Disney CEO Bob Chapek pointed out the NHL's performance on ESPN+ and Hulu LLC, as well as a strong delivery from the mixed martial arts circuit UFC as drivers. This time around, the executive did not provide any specifics behind the service's customer expansions.

However, Disney's direct-to-consumer unit benefited in part from the bundling on Disney+ and ESPN+ with Hulu LLC's live TV service. CFO Christine McCarthy told analysts on the Feb. 9 earnings call that the company added 4.1 million paid domestic Disney+ subscribers, including a benefit of approximately 2 million incremental subscribers from "our strategic decision" to include Disney+ and ESPN+ as part of a Hulu Live subscription.

Beginning Dec. 21, 2021, Hulu Live TV + subscription video-on-demand service now includes Disney+ and ESPN+. Previously, Hulu Live TV + SVOD offering was sold as a stand-alone service, or with Disney+ and ESPN+ as optional additions.

In its Form 10-Q filing, Disney reported the average monthly revenue per paid subscriber for ESPN+ increased to $5.16 in the first quarter of its fiscal 2022 period, primarily due to an increase in retail pricing and higher per-subscriber advertising revenue, partially offset by a higher mix of subscribers to the abovementioned bundle.

That compares with $4.74 in the final fiscal 2021 reporting period, ended Oct. 2, 2021, and $4.48 million in the year-earlier period.

The improvements came with a price. ESPN+'s programming and production costs rose 78% to $427 million from $270 million in the year-earlier period. Disney attributed the increase largely to its new NHL rights deal, as well as its rights pact with La Liga, Spain's top soccer circuit.

In the first of a seven-season pact that extends through the 2027-28 campaign, ESPN+ and Hulu's SVOD service are streaming 75 games. Moreover, ESPN+ is now the home to some 1,000 out-of-market games that were previously offered through NHL.TV and are now part of Disney's sports streaming service.

All told, Disney's direct-to-consumer unit posted a 34% revenue rise to $4.69 billion in the first quarter of fiscal 2022, from $3.50 billion in the prior-year period.

Subscription fees jumped 41% to just under $3.60 billion, while advertising grew 11% to $980 million.

The direct-to-consumer unit also registered a 47% gain in TV/SVOD distribution and other revenue to $112 million, tied to higher UFC pay-per-view fees, reflective of higher average buys per event and pricing increases, partially offset by the impact of airing two events in the current quarter compared to three events in the prior-year quarter. In order to purchase UFC PPV events, fans must subscribe to ESPN+.

The segment's operating loss widened, though, to $593 million from $466 million, behind higher programming and production cost and increases in other expenses.

Overall, Disney's quarterly revenue climbed 34.3% to $21.82 billion from $16.25 billion in the first quarter of its fiscal 2021.