Disney's Strategic Gamble: Combining Hulu and Disney+ for a Four-Quadrant Streaming Service

In May, Walt Disney Company CEO Bob Iger announced that Hulu content will be integrated into Disney+ by the end of the year to form a unified streaming app experience. At first glance, this seems to make sense as the two platforms cater to complementary audience demographics with their original libraries. 

The size of the points, or circles, in the chart indicates the level of concentrated demand. The bigger the circles, the more demand. According to Parrot Analytics, Disney+ originals tend to resonate more with younger and older males while Hulu tends to over-index most with older females. Bringing the two together is an attempt to create a more four-quadrant service for consumers. 

But will a beefed up single-service app be enough to reignite Disney’s streaming growth engine? Hulu, which is only available in the US, is averaging just 650,000 new subscribers per quarter over the last year while Disney+ has lost 6.4 million worldwide subs over the last two quarters.

From December 2022 to April 2023, Hulu’s average revenue per user (ARPU) fell 6% to $11.73 and while Disney+’s global ARPU rose 13% in that same span, it’s still small at just $4.44. It’s partially why Disney’s Direct-to-Consumer segment has lost upwards of $1.7 billion over its past two quarters. 

Warner Bros. Discovery may be the right point of comparison for Disney right now as the company combined Discovery+ and HBO Max on May 23 after an aggressive removal of underperforming content, a strategy Disney has now adopted as well.

The average US demand among the top 20 most in-demand titles on Max rose 2% one month after the merger compared to the month prior, while WBD managed to turn a $50 million streaming profit last quarter. 

Disney is hoping that it is paving a similar path forward toward profitability and expanded audience.

It remains to be seen if that will ultimately be the case. But Iger and Co. clearly feel as if a more centralized streaming experience will better mesh the blockbuster franchise IP and kid-friendly content of Disney+ with the more adult-skewing general entertainment originals of Hulu.