Disney+ reaches 138 million subscribers and exceeds expectations

Disney+ kept its momentum fully charged as the streamer handily outperformed 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, a 33% year-over-year increase. Analysts expected, on average, Disney+ to bring in 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 led investors to fear an industry-wide slowdown after a pandemic-driven surge over the past two years. Disney+’s strong profits dispel that notion and suggest the Mouse House is stealing market share from Netflix.

In addition, the company expects Disney+ net subscriber numbers to be stronger in the second half of fiscal year 2022 than in the first half, executives said earlier, but that may not be “as high as previously expected,” CFO said. Christine McCarthy on the win call.

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Overall, Disney missed financial expectations for the quarter ended April 2, the second quarter of fiscal 2022. The company reported revenue of $19.25 billion (up 23%) and profit of 26 cents per year. share for the quarter. On average, Wall Street expected Disney to reach $20.05 billion in revenue, per FactSet data. Adjusted earnings came in at $1.08 per share, below analysts’ forecasts for adjusted earnings per share of $1.19.

Disney’s revenue for the quarter hit $1.02 billion “for the amount a customer owes to terminate early movie and television content licensing agreements” delivered in prior years, allowing it to sell content “primarily on our direct-to-consumer services,” the company said (without identifying the customer), which could be a reference to Disney’s former licensing agreement with Netflix.

Shares of Disney fell more than 2% in after-hours trading on Wednesday. Amid the broader ongoing slump in US financial markets, Disney shares closed 2.3% in regular trading, to $105.25 a share – a new two-year low.

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

While Disney expected total content spending for fiscal year ’22 to hit a whopping $33 billion, it now forecasts it to be around $32 billion due to a “slightly slower than expected pace of spending” in the first half of the year. 2022, McCarthy told analysts.

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

Disney’s Parks, Experiences and Products segment exceeded top and bottom analyst expectations, driven primarily by the strength of the company’s domestic parks business with the theme parks reopening after pandemic closures. Segment revenue for the quarter more than doubled year over year to $6.7 billion and segment operating income came in at $1.8 billion, compared to a loss of $400 million in the year-ago quarter.

Disney’s linear TV business showed some resilience on the domestic side in a choppy market, but higher programming and marketing costs took their toll on Disney’s dwindling international channel group. Revenue for the international channels was down 3% year over year (to $1.29 billion), but operating income fell 30% to $245 million due to channel closures and unfavorable FX exchanges. Higher ratings at ABC and its R&D stations helped improve domestic linear TV revenues for the quarter by 8% from the year-ago quarter to $5.8 billion, while operating income rose 3% to $2.3 billion.

The company’s bottom line was hurt by several one-time charges, including $195 million from the impairment of an “intangible asset” related to Disney Channel in Russia, a $158 million non-cash loss on Disney’s investment in DraftKings and the $1 billion payout of content licenses on early termination.

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

In another effort to drive streaming growth, the media conglomerate plans to launch a lower-cost, ad-supported version of Disney+, initially in the US before the end of 2022. During the conversation, Disney executives did not share. additional details for the ad-based Disney+ tier. Netflix is ​​looking to the fourth quarter to roll out an ad-supported plan.

Disney is also counting on buzzy titles coming to Disney+ to bring in new subs and keep existing ones, such as “Obi-Wan Kenobi” starring Ewan McGregor (May 27) and Marvel’s “Doctor Strange in the Multiverse of Madness” , which are expected to hit the streaming service sometime in July. As theatergoers returned to the multiplex, “Doctor Strange 2” domestically grossed an impressive $185 million during its opening weekend (May 6-8).

(Pictured above: Disney+ Original Series “Moon Knight” starring Oscar Isaac)

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