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Can Disney's Hulu-Disney+ Integration Lift ARPU and Boost Retention?
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Key Takeaways
Disney is merging Hulu into Disney by 2026 to reduce churn and improve customer retention.
The move is expected to lower acquisition costs by 30% and lift ARPU through bundling and ads.
Disney forecasts 185.4M combined subscribers by year-end 2025, with revenue growth of 4% in 2025.
Disney’s (DIS - Free Report) decision to fully integrate Hulu into Disney+ could prove to be a pivotal moment in its streaming strategy. By creating a unified app that blends branded entertainment, general content, sports and news, the company is aiming for more than convenience — it is targeting higher retention, reduced churn and stronger revenue growth.
The long-term prospects are significant. Management has emphasized that a single, streamlined platform will simplify the customer experience while broadening engagement and monetization opportunities. Consolidating technology, operations and marketing is also expected to generate billions in savings, while simultaneously boosting advertising inventory and enabling more effective bundling. This positions Disney to drive higher Average Revenue Per Paid Subscriber (ARPU).
The early signs are encouraging. In the last reported results for third-quarter fiscal 2025, the Direct-to-Consumer segment generated $346 million in operating income, reversing a $19 million loss a year earlier, with revenues up 6% year over year. Disney plans to complete the integration by 2026, phasing out the standalone Hulu app and shifting all features into Disney+. The company projects this move will cut customer acquisition costs by up to 30% while improving customer lifetime value through personalization and cross-platform engagement.
Looking ahead, Disney expects more than 10 million additional subscriptions in the fourth quarter of fiscal 2025, with the Zacks model forecasting the combined Disney+ and Hulu base at 185.4 million by year-end. Supported by higher ARPU, the Hulu-Disney+ integration appears well-positioned to deliver sustainable growth and stronger Entertainment margins. The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues indicates a year-over-year increase of 4% and 6%, respectively.
Disney & Rivals: Subscriber Retention Face-Off
Netflix Inc. (NFLX - Free Report) excels in subscriber retention through global scale, disciplined content investment and advanced personalization that keep viewers engaged. Netflix leverages its recommendation engine, autoplay features and strong originals to reduce churn while expanding internationally. Its ad-supported tier and proprietary ad-tech platform boost monetization without sacrificing affordability, enhancing stickiness. With over 300 million subscribers and accelerating growth, Netflix continues to outpace Disney by combining innovative retention strategies with profitability, reinforcing Netflix’s position as the streaming industry’s most resilient competitor.
Warner Bros. Discovery (WBD - Free Report) leverages its HBO, Discovery and DC libraries to increase subscriber retention while simultaneously increasing stickiness through bundling, which includes the Disney+ Hulu + Max package. In the second quarter of 2025, WBD grew to 125.7 million subscribers, lifting streaming revenues 9% year over year. Through a strategic split to sharpen its policies and focus on bundling and premium content, WBD is positioning itself as a strong streaming competitor against Disney despite a slowdown in original content investment.
Disney shares have gained 1.9% in the year-to-date period, underperforming both the Zacks Consumer Discretionary sector’s rise of 10.4% and the Zacks Media Conglomerates industry’s growth of 8.7%.
DIS’ YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, DIS stock is currently trading at a forward 12-month price/earnings ratio of 17.5X compared with the industry’s 20.88X. DIS has a Value Score of B.
DIS’ Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Disney’s fiscal 2025 and 2026 earnings is pegged at $5.86 and $6.49 per share, respectively, reflecting upward revisions over the past 30 and 60 days. These figures suggest year-over-year growth of 17.91% in fiscal 2025 and 10.69% in fiscal 2026.
Image: Bigstock
Can Disney's Hulu-Disney+ Integration Lift ARPU and Boost Retention?
Key Takeaways
Disney’s (DIS - Free Report) decision to fully integrate Hulu into Disney+ could prove to be a pivotal moment in its streaming strategy. By creating a unified app that blends branded entertainment, general content, sports and news, the company is aiming for more than convenience — it is targeting higher retention, reduced churn and stronger revenue growth.
The long-term prospects are significant. Management has emphasized that a single, streamlined platform will simplify the customer experience while broadening engagement and monetization opportunities. Consolidating technology, operations and marketing is also expected to generate billions in savings, while simultaneously boosting advertising inventory and enabling more effective bundling. This positions Disney to drive higher Average Revenue Per Paid Subscriber (ARPU).
The early signs are encouraging. In the last reported results for third-quarter fiscal 2025, the Direct-to-Consumer segment generated $346 million in operating income, reversing a $19 million loss a year earlier, with revenues up 6% year over year. Disney plans to complete the integration by 2026, phasing out the standalone Hulu app and shifting all features into Disney+. The company projects this move will cut customer acquisition costs by up to 30% while improving customer lifetime value through personalization and cross-platform engagement.
Looking ahead, Disney expects more than 10 million additional subscriptions in the fourth quarter of fiscal 2025, with the Zacks model forecasting the combined Disney+ and Hulu base at 185.4 million by year-end. Supported by higher ARPU, the Hulu-Disney+ integration appears well-positioned to deliver sustainable growth and stronger Entertainment margins. The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues indicates a year-over-year increase of 4% and 6%, respectively.
Disney & Rivals: Subscriber Retention Face-Off
Netflix Inc. (NFLX - Free Report) excels in subscriber retention through global scale, disciplined content investment and advanced personalization that keep viewers engaged. Netflix leverages its recommendation engine, autoplay features and strong originals to reduce churn while expanding internationally. Its ad-supported tier and proprietary ad-tech platform boost monetization without sacrificing affordability, enhancing stickiness. With over 300 million subscribers and accelerating growth, Netflix continues to outpace Disney by combining innovative retention strategies with profitability, reinforcing Netflix’s position as the streaming industry’s most resilient competitor.
Warner Bros. Discovery (WBD - Free Report) leverages its HBO, Discovery and DC libraries to increase subscriber retention while simultaneously increasing stickiness through bundling, which includes the Disney+ Hulu + Max package. In the second quarter of 2025, WBD grew to 125.7 million subscribers, lifting streaming revenues 9% year over year. Through a strategic split to sharpen its policies and focus on bundling and premium content, WBD is positioning itself as a strong streaming competitor against Disney despite a slowdown in original content investment.
DIS’ Share Price Performance, Valuation & Estimates
Disney shares have gained 1.9% in the year-to-date period, underperforming both the Zacks Consumer Discretionary sector’s rise of 10.4% and the Zacks Media Conglomerates industry’s growth of 8.7%.
DIS’ YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, DIS stock is currently trading at a forward 12-month price/earnings ratio of 17.5X compared with the industry’s 20.88X. DIS has a Value Score of B.
DIS’ Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Disney’s fiscal 2025 and 2026 earnings is pegged at $5.86 and $6.49 per share, respectively, reflecting upward revisions over the past 30 and 60 days. These figures suggest year-over-year growth of 17.91% in fiscal 2025 and 10.69% in fiscal 2026.
Image Source: Zacks Investment Research
DIS currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.