The Walt Disney Company’s recent distribution agreements with Charter Communications and DirecTV impacted a key metric that analysts and investors evaluate to gauge the effectiveness of its streaming business.
On Thursday, the company said its average revenue per user, or ARPU, associated with its flagship Disney Plus streaming service was $7.70 during the company’s fiscal fourth quarter (Q4) of the year, down 1 percent compared to its ARPU for Disney Plus last year. General entertainment service Hulu earned $12.54 ARPU during Q4, down 1 percent from last year.
Disney affirmed its streaming-related ARPU was impacted in part by new wholesale purchase arrangements it has with certain distributors. The company did not name its distribution partners who purchase Disney Plus and Hulu through those deals.
Related: Disney streamers maintain profit during Q4, CTV ad business healthy
Last year, the company entered into a new distribution contract with Charter Communications that allowed the telecom to provide free access to Disney Plus, Hulu and ESPN Plus to subscribers of its Spectrum TV service when they have certain entertainment and sports channels in their packages.
The arrangement is based upon a wholesale purchase agreement, through which Charter pays Disney a price that is below the retail cost of each service. The ad-supported tiers of Disney Plus and Hulu are offered to Spectrum TV subscribers without any additional charge, though customers can pay a small fee to upgrade to the ad-free plans if they want.
Disney and Charter have not disclosed how many customers are activating their subscriptions to Disney Plus and Hulu through the arrangement, though reports published earlier this year suggest the uptake is relatively low. In July, Puck News reported fewer than one out of 10 Spectrum TV customers had signed up for their free Disney Plus account — which is not entirely great, given that Charter is paying for the subscription, whether customers activate it or not.
Disney has since entered into a similar distribution agreement with satellite and streaming TV provider DirecTV, and the expectation is that the deal is substantially similar to the one it forged with Charter, though precise details have not been made public. The deal was effectuated during part of Disney’s fiscal Q4, which likely had a minor impact on overall streaming ARPU.
That said, Disney’s direct-to-consumer streaming business is relatively healthy, with the company earning $5.783 billion in revenue during the quarter, of which $321 million was profit. That figure was much higher than the $49 million Disney reported during the prior quarter, and fully reversed its $387 million streaming loss logged during fiscal Q4 2023.
A major reason for the higher income: A combination of price adjustments and higher advertising revenue, coupled with a crackdown on password-sharing among Disney Plus and Hulu subscribers that took effect in Q4.
