Why Disney Stopped Subscriptions on the App Store
Ariel Michaeli (October 2024):
I see Disney’s choice of leaving the App Store as a long-term mistake that would cost them even more than the 30% they were giving Apple.
Now that we have enough MRR data I think the reason is a bit clearer - and it isn’t just about fees.
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In November, the first full month of no subscriptions, Disney+’s net revenue dropped by about $16M and Hulu’s by 28% - that’s double-digit millions in both cases - which means paying users are abandoning Disney at an alarming rate.
I think the reason Disney pulled out of subscriptions in the App Store is because they couldn’t figure out how to fight the churn which in turn necessitated getting fresh subscribers which isn’t easy.
Maybe I’m missing something, but this doesn’t make sense to me. First, the revenue reported is from both the App Store and Google Play; it would be helpful to see the Apple portion broken out. Second, why would leaving the App Store help with churn? I could maybe see that there’s more churn with App Store customers because Apple makes it easier to cancel. If you can get the same person to subscribe on the Web they might be more sticky. But, on the other hand, maybe it’s easier to sign them up with IAP. Easy come, easy go.
Without knowing the overall revenue picture, including direct-to-Disney revenue, I think it’s hard to conclude much. Of course, the App Store numbers are going down because every month there will be some cancellations with no new sign-ups. But we don’t know how many new and return subscribers there are or whether that would have been higher or lower with the App Store. Presumably, in the past there was a good stream of new App Store subscribers since the total was up over the year.
To me, the only thing this shows for sure is that the churn is very high, which suggests that lots of App Store subscribers were not staying long enough for Disney to go down from paying 30% to 15% in fees to Apple.
Previously:
Update (2024-12-20): Joe Rosensteel:
I have no data for this, but I continue to believe this is mostly about bundling in two ways: Bundles combat churn because people don’t want to start/stop parts of a bundle. Bundlers can also charge more for a bundle, which means higher fees. I think part of this will be explained when we see how much the “flagship” ESPN product will eventually cost.
The non-bundle DTC angle is that Disney can directly appeal to customers to rejoin for “relevant” shows. Can’t do that through Apple.
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Maybe the point is that they have not enough visibility and KPIs on the churn on the App Store, nor any way to mitigate it. Outside of the App Store, they know the user better : name, email, etc. and can develop strategies to keep them on longer with actionable KPIs.
Not saying it's the right decision, but that would be my guess.
A couple of points:
- With the simplicity of cancellation and resubscribing on the App Store, Disney may have found a lot of App Store originated customers cancelling and resubscribing regularly depending upon content releases etc. If this is the case, it would inflate their churn (when looking across a single month) and also would mean they constantly pay Apple 30% for these customers; instead of 15% if the customer had been retained for 1+ year. The financial impact of such behaviour would be very large for Disney.
- As you note, without knowing overall revenue (including DTC revenue), this could be seen as a positive that Disney is successfully migrating App Store originated customers across to DTC customers and saving themselves 15-30% in the process. If customers are cancelling and re-engaging regularly, then the re-engaged customers in November would be becoming direct customers but not show in the App Store figures.
- Bundles are the future; both to lower churn and increase per customer revenue. Already being done with Disney+ and Hulu and ESPN+ and Max. In the future with the full ESPN. The 30% App Store tax is a lot harder pill to swallow when each customer pays you $30 per/month vs $10 per/month.
