Disney reduces streaming losses but sheds subscribers as earnings meet expectations

Walt Disney has reported a reduction in streaming losses by US$400 million from the previous quarter; however, the company also experienced a drop in subscribers. The entertainment giant shared this information on Wednesday as part of its recent quarterly earnings release, which fell in line with Wall Street expectations. Following the report, shares of Disney declined by 4.4% during after-hours trading.

A price increase and decreased marketing expenses contributed to the enhanced performance of Disney’s streaming unit from January to March. The division concluded the quarter with an operating loss of US$659 million, compared to US$1.1 billion in the previous quarter. Concurrently, total subscribers to the flagship Disney+ service declined by four million to 157.8 million.

The majority of the subscriber losses came from the Disney+ Hotstar offering in India, following the service losing streaming rights to Indian Premier League cricket matches. Disney also lost 300,000 customers in the United States and Canada due to a price increase introduced last December. Industry analysts had anticipated that Disney would gain over 1 million customers during the quarter, said Paul Verna, an analyst at Insider Intelligence.

Despite Wall Street pressuring media companies to generate profits from the billions of dollars they have invested in streaming in recent years to compete with Netflix, investors seem to remain “fixated on subscriber net additions”, stated PP Foresight analyst Paolo Pescatore. He added that striking a balance between customer acquisition and financial performance is challenging.

Inge Heydorn, a fund manager at GP Bullhound, questioned whether the trade-offs from lower marketing costs are resulting in fewer subscribers. Disney’s diluted earnings per share amounted to 93 cents, matching the consensus forecast of analysts surveyed by Refinitiv. Furthermore, the company’s revenue reached US$21.82 billion, slightly exceeding analyst predictions of US$21.79 billion.

Disney’s theme parks continued to draw visitors, with growth at Shanghai Disney Resort, Disneyland Paris, and Hong Kong Disneyland Resort contributing to a 23% increase in the unit’s operating income year-on-year to US$2.2 billion. Disney’s Chief Executive, Bob Iger, mentioned plans to expand streaming offerings by the end of the year, introducing a new app merging the family-friendly Disney+ with the Hulu general entertainment service.

This new app will streamline the viewing experience for subscribers, providing more opportunities for advertisers, according to Iger. Additionally, an ad-supported option will be introduced to Disney+ in Europe by year-end. Iger revealed Disney’s intention to exceed its initial US$5.5 billion cost-cutting goal, which was partially addressed through 7,000 job cuts.

However, Disney’s traditional television business faces challenges as it attempts to build its streaming services. Operating income at linear networks fell 35% year-on-year to US$1.8 billion, partly due to increased sports programming and production costs related to the College Football Playoffs and the NFL at ESPN and reduced advertising revenue at ABC and its owned television stations, reports Channel News Asia.