Disney+ powers 138 million subscribers, exceeding expectations

Disney+ maintained its fully charged momentum as the streamer easily exceeded Wall Street’s growth forecast for the March 2022 quarter.

Disney’s flagship streamer gained 7.9 million paying customers in the first three months of 2022 to 137.7 million, up 33% year-over-year. Analysts on average had expected Disney+ to register 5.2 million new subscribers, per FactSet.

The results contrast with streaming rival Netflix, which reported a loss of 200,000 streaming subscribers for the same period and forecast a drop of 2 million for the second quarter. That has led investors to fear an industry-wide slowdown after a pandemic-fueled surge over the past two years. Strong Disney+ earnings dispel that notion and suggest that Mouse House is stealing market share from Netflix.

Additionally, the company expects net subscriber additions to Disney+ to be larger in the second half of its 2022 fiscal year than in the first half, as executives have previously said, but that may not be “as big as expected,” Chief Financial Officer Christine McCarthy said. earnings call.

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Overall, Disney fell short of financial expectations for the quarter ended April 2, which is its second quarter of fiscal 2022. The company reported revenue of $19.25 billion ( up 23%) and earnings of 26 cents per share for the quarter. Wall Street on average expected Disney to post $20.05 billion in revenue, according to FactSet data. Adjusted earnings came in at $1.08 per share, below analysts’ forecast for adjusted EPS of $1.19.

Disney’s revenue for the quarter took a hit of $1.02 billion “for the amount owed to a customer for early termination of film and television content licensing agreements” delivered in prior years so that it may use the content “primarily on our direct-to-consumer offering”. services,” the company said (without identifying the customer). This could be a reference to Disney’s old licensing deal with Netflix.

Disney shares fell more than 2% in after-hours trading on Wednesday. Amid the ongoing broader slump in U.S. financial markets, Disney stock closed down 2.3% in regular trading, at $105.25 per share – a new two-year low.

The quarterly results “proved once again that we’re in a league of our own,” boasted Disney chief Bob Chapek in prepared remarks. He added, “We think Disney+ is one of a kind,” with appeal in “all four quadrants.” Chapek said Disney+ remains on track to hit 230 million to 260 million subscribers by the end of fiscal 2024.

While Disney forecast total content spending for FY22 to be $33 billion, it now expects it to be around $32 billion due to a “slightly slower pace of spending.” slower than expected” in the first half of 2022, McCarthy told analysts.

Disney’s trio of streaming services reached 205.6 million worldwide, a quarterly net increase of 9.2 million thanks to Disney+. At the end of the quarter, this included 45.6 million for Hulu (up 10% year-on-year) and 22.3 million for ESPN+ (up 62% year-on-year). Disney+ subscribers in the US/Canada region reported 1.5 million in the March 2022 quarter, to 44.4 million.

Disney’s Parks, Experiences and Products segment exceeded analysts’ expectations for revenue and profit, primarily due to the strength of the company’s national parks business with the reopening of theme parks following the pandemic closures. Segment revenue for the quarter more than doubled year-over-year to $6.7 billion and segment operating profit was $1.8 billion, compared to a loss of $400 million in the year-ago quarter.

Disney’s linear television business showed some resilience on the domestic side in a choppy market, but higher programming and marketing costs weighed on Disney’s declining international channel group. International chains’ revenue fell 3% year-over-year (to $1.29 billion), but operating profit fell 30%, to $245 million, due to shutdowns channels and unfavorable exchange rates. Higher ratings for ABC and its O&O stations helped National Linear TV revenue for the quarter improve 8% from the prior year quarter to $5.8 billion , while operating profit edged up 3% to $2.3 billion.

The company’s net income was impacted by several one-time charges, including $195 million due to the impairment of an “intangible asset” related to the Disney Channel in Russia, a non-cash loss of $158 million on the Disney’s investment in DraftKings and the loss of a $1 billion content license payment upon early termination.

Looking ahead, Disney+ is set for a big international expansion this summer, to 42 additional countries and 11 territories across Europe, West Asia and Africa. The final phase of the streamer’s rollout will begin on May 18 in South Africa.

In another bid to spur streaming growth, the media conglomerate plans to launch a cheaper, ad-supported version of Disney+, initially in the United States before the end of 2022. On the call, executives from Disney did not share any additional details for the announcement. -level based on Disney+. Netflix is ​​eyeing the fourth quarter for the rollout of an ad-supported plan.

Disney is also banking on hot titles coming to Disney+ to attract new subs and retain existing ones, like “Obi-Wan Kenobi” starring Ewan McGregor (May 27) and “Doctor Strange in the Multiverse of Marvel’s Madness,” which is slated to hit the streaming service in July. As viewers returned to the multiplex, “Doctor Strange 2” raked in $185 million domestically in its opening weekend (May 6-8).

(Pictured above: Disney+ original series “Moon Knight” with Oscar Isaac)

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