- Q1 subscriptions disappoint
- Theme parks standout performer
- New advertising-led tier to launch in Europe
Walt Disney (DIS:NASDAQ) shares fell more than 4% in after-hours trading as the group revealed it had lost four million subscribers in the second quarter to 157.8 million, undershooting Wall Street expectations of 163.17 million.
Most of the losses came from the company’s Disney+ Hotstar offering in India after it lost the streaming rights to Indian Premier League cricket matches.
The company also lost 300,000 customers in the US and Canada following price increases at the end of 2022.
However, price rises drove revenue at the DTC (direct-to-consumer) business up 12% to $5.5 billion, helping to reduce losses at the unit to $659 million, which was better than the $841 million projected by analysts.
Overall revenue came in slightly above estimates at $21.82 billion, up 13%, while adjusted EPS (earnings per share) was in line at $0.93, down 14% year-on-year.
STRONG THEME PARKS
A bright spot was the parks, experiences and products division, where revenues increased 17% to $7.7 billion driven by guests spending more time and money in the quarter both domestically and internationally.
Looking ahead, the company plans to cut back on content production and streamline services in the DTC business. Finance chief Christine McCarthy revealed Disney expected to book a $1.5 billion to $1.8 billion write-down in the third quarter.
EXPERT VIEW
AJ Bell investment director Bell Russ Mould commented: ‘One of the biggest gripes investors have had with the company is the fact its Disney+ streaming platform has been losing large amounts of money.
‘News that the platform reduced its operating losses from $1.1 billion to $659 million quarter-on-quarter should have been seen as significant progress towards its goal of making Disney+ profitable. However, the market seems to have been fixated by the four million reduction in subscriber numbers.
‘A new advertising-led subscription tier will be launched in Europe by the end of 2023 as a way of attracting more customers, but Disney did warn that prices for the advertising-free tier will go up again.
‘That’s a bold move as it risks advertising-free tier customers downgrading their package to the cheaper tier – although early learnings from Netflix’s new cut-price advertising-led tier would suggest fewer people are switching packages than one might expect.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) own shares in AJ Bell.
