Disney’s CEO has admitted the company is yet to strike the right “balance” on its marketing spend behind its streaming services.

“We actually have not really achieved the kind of balance we know we need to achieve in terms of cost savings and pricing and money spent on marketing,” CEO Bob Iger told investors on a call overnight (9 August).

The business launched its Disney+ streaming service in 2019 and owns other direct-to-consumer streaming products, including Hulu and ESPN+.

An investor on Disney’s quarter three earnings call put to Iger that the margins on Disney’s DTC portfolio are “meaningfully below where Netflix was at a similar revenue scale”.

Iger admitted: “We’d love to have the margins Netflix has.”

However, he pointed out that Disney’s DTC efforts were less than four years old, versus Netflix which is more experienced, having begun streaming in 2007.

“[Netflix] figured out how to really carefully balance their investment in programming with their pricing strategy and what they spend in marketing,” Disney’s Iger said, adding that his company still has room for improvement in this area.

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In May, Iger admitted the business had been “spreading [its] marketing costs… thin” and was not marketing its “big tentpole movies” adequately when they were made available on its streaming services.

These films act as big drivers of subscriptions, he claimed, stating there was “an opportunity to lean into those more, put the right marketing dollars against it”, and move marketing spend away from programming that doesn’t act to drive subscribers.

Not all markets are created equal.

Bob Iger, Disney

In its most recent quarter, ended 1 July 2023, Disney+ saw its number of paying subscribers increase by 1%. However, in its home markets of the US and Canada, subscribers decreased by 1%. It did see its revenue per paid Disney+ subscriber increase by 2% this quarter, though.

As well as ensuring marketing spend is weighted behind programming that acts to drive subscribers, Iger spoke in Disney’s most recent earnings call about ensuring it had the right level of investment across its markets.

The company has been looking at international markets to determine which are more profitable.

“Not all markets are created equal,” Iger said, saying the company would prioritise its marketing spend behind more profitable markets.

He hailed a “more cost-effective” company overall since he returned as CEO nine months ago. The company saw its operating loss for its DTC services reduce from $1.1bn (£0.9bn) to $0.5bn (£0.4bn) for the quarter. It also reported it is “on track” to exceed its savings goal of $5.5bn (£4.3bn).

Overall, for the three months to the beginning of July, revenues across Disney increased 4% to $22.33bn (£17.49bn).

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UK ad-supported tier

Disney has also confirmed it will be rolling out its ad-supported tier for Disney+ in European countries including the UK.

As of Disney’s most recent quarter, 3.3 million subscribers had signed up to the ad-supported tier, which has been available in the US since December. The service will be rolled out in the UK in November.

The new ad-supported tier will cost UK subscribers £4.99 a month, the next cheapest tier will be priced at £7.99 per month. The current cheapest tier for UK subscribers is £7.99.

While Iger said the roll-out to Canada and select European markets comes amid the company feeling “very optimistic about [its] long-term advertising potential”, Disney+ actually saw lower advertising revenues in the quarter, the company reported.