- Disney added 12.1 million Disney+ subscribers and 14.6 million direct customers in its fiscal fourth quarter.
- But Disney’s operating losses more than doubled in the quarter.
- Shares fell as investors saw lower-than-expected earnings and revenue as more bearish than higher-than-expected streaming subscriber growth.
The biggest media and entertainment companies are advising investors to focus on revenue and profits, not subscriber growth — a message that has backfired on Disney Tuesday.
Disney added 12.1 million Disney+ subscribers and 14.6 million direct customers in its fiscal fourth quarter. Both numbers beat most analysts’ estimates and outperformed quarterly gains. Netflixwhich attracted just 2.4 million new subscribers in the quarter.
A year ago, solid streaming growth may have pushed Disney stock higher. But media and entertainment executives are pushing investors to value their companies on profits and earnings, not just on subscriber count. And those numbers have not been kind to Disney this quarter.
Disney shares fell 6% after hours.
Disney’s total quarterly revenue of $20.1 billion is below the average analyst estimate by nearly $1 billion based on Refinitv consensus estimates. Net operating losses for Disney’s streaming division, which includes Disney+, Hulu and ESPN+, rose to $1.47 billion in the quarter. That’s more than double what it was a year ago, for which Disney blamed in part a lack of “first-class access” content or theater-released films that Disney charged an extra $30 to watch, such as Black Widow and Cruise on jungle.” “
Disney said it expects this quarter to be the lowest for streaming and confirmed profitability. Disney CFO Christine McCarthy said during a conference call on Disney’s earnings and loss that operating losses will improve by about $200 million in the next quarter and will be even lower in the second fiscal quarter of 2023.
On December 8th, Disney launches an ad-supported tier for $7.99 per month. The company has announced a significant price increase that will also begin next month. Both measures are put in place to increase revenue and profits, not to increase the number of subscribers. The benefits of both changes will help boost Disney’s revenue and profits, especially in next year’s fiscal second quarter, McCarthy said during a conference call.
“We expect our DTC operating losses to narrow going forward and that Disney+ will still reach profitability in fiscal 2024, unless we see significant changes in the economic climate,” Disney CEO Bob Chapek said in a statement.
Disney warned that the number of core Disney+ subscribers will only increase “slightly” next quarter after the company added 9.3 million non-Hotstar customers this quarter. Disney+ core customers pay higher than Disney subscribers in India, with an average revenue per user of $5.96/month compared to $0.58/month for Hotstar.
But for now, Disney is trapped between the old story of steady subscriber growth and the present and future story of business fundamentals. And investors did not forgive.
WATCH: Disney’s earnings reaction
Credit: www.cnbc.com /