Disney Loses $1 Billion for Ending Licensing Deals to Bolster Disney+ and Hulu

Disney is losing a whopping $1 billion for ending its licensing agreements that helped create content blocks necessary to bolster the Disney+ and Hulu streaming services in the previous years. In the latest Walt Disney investors call for Q2 2022, Disney execs explained that while streaming service subscribers were up, the $1 billion loss (or “revenue reversal”) was a major hit to financials. As it was stated, Disney “owed a customer to early terminate license agreements for film and television content delivered in previous years in order for the Company to use the content primarily on our direct-to-consumer services.”

Hulu and Disney+ have seen a drastic transformation under Disney’s movement to claim a market share of the streaming wars. Hulu, in particular, thrived as one of the biggest go-to sources for television streaming content. The service had licensing deals in place to pull television and movie content from all across the network/studio map; however, as studios have all pooled resources into their own streaming services, the aging model of sustaining content blocks through extensive licensing seems to be quickly going extinct. Disney knows this more than most; the company has been spending the last decade making chess moves of building itself into an entirely in-house streaming and movie content leader. After the 2020 pandemic exponentially increased the rate at which streaming took the lead, Disney bolstering its in-house content and shaking off these agreements makes sense. Even though it comes at big cost. 

Despite the loss, Disney CEO Bob Chapek was optimistic in his outlook of how Disney’s streaming block is developing: 

“Another standout this quarter were streaming services,” Chapek said on the investors call. “We ended q2 With more than 205 million total subscriptions after adding 9.2 million in the quarter. That includes 7.9 million Disney plus subscribers, keeping us on track to reach 230 to 260 million Disney plus subscribers by fiscal 24. The growth of the platform since its launch reinforces its unique nature. Quite simply, we believe Disney plus is one of a kind… with general entertainment titles designed to drive signups amongst specific audiences and deepen engagement amongst those cohorts. A benefit of our incredible creative engines and decades of general entertainment excellence is that we can reach these demographics not only through the creation of original titles, but also by shifting resources from across our content ecosystem, especially as consumer behavior continues to evolve.”

You can sign up for Disney+ and Hulu through the links.

Sources: Disney & Deadline