Disney+ exceeded subscriber expectations, but its growth came at a cost

New York
CNN business
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Disney’s fourth quarter earnings were a mix of good news and bad news for the company.

Pros: The company added 12.1 million new Disney+ subscribers for a total of 164.2 million global subscribers, beating Wall Street’s expectations.

The Bad: Disney underperformed expectations for other aspects of its business, including sales. More importantly, the company’s streaming business was costly. He lost $630 million in the fourth quarter last year, and this quarter he lost $1.5 billion.

Revenue for the quarter was $20.1 billion, up 9% from last year. However, analysts expected more than $21 billion. Earnings were his $162 million, up 1% from last year.

The result sent Disney’s stock down about 10% in after-hours trading.

In a letter to investors on Tuesday, Disney CEO Bob Chapek said, “Just three years after its launch, Disney+’s rapid growth has been driven by a large amount of money being spent on creating great content and expanding the service internationally. is a direct result of our strategic decision to invest in [direct to consumer] The operating loss will shrink in the future. ”

Chapek added that the streaming unit will continue to “achieve profitability in fiscal year 2024.” But he added an important caveat to that promise, saying “assuming no meaningful change in economic conditions.”

“By rebalancing our costs and realizing the benefits of our price increases and the upcoming Disney+ ad-supported tier on December 8th, we will drive continued growth and generate profitable shareholder value well into the future. I’m sure we’ll be on our way to making our streaming business a reality,” he said.

Disney’s earnings have come to an inflection point in how investors measure success in the streaming world.

For years, Wall Street’s focus has been on how fast streaming services can grow. Things have changed this year as services like Netflix have come under more scrutiny when it comes to profitability.

Disney seems to be under the same microscope.

Streaming unit growth was solid in the quarter, with Disney+, Hulu and ESPN+ totaling over 235 million subscribers. Still, the extent of those losses sent the stock down Tuesday night.

Ultimately, the costs associated with Disney’s streaming efforts were behind the company’s decision to raise prices earlier this year. is being introduced.

The commercial-free Disney+ premium tier jumped from $3 to $10.99 per month, the company announced in August. This is the platform’s largest price increase since its debut in November 2019.

The company’s new advertising plan will debut in the US on December 8th for $7.99 per month. That price is what consumers paid for Disney+ without ads.

Elsewhere in Disney’s media kingdom, the company’s Parks, Experiences and Products division generated revenue of $7.4 billion, up 36% from last year.

This is impressive considering that coronavirus restrictions forced Disneyland in Shanghai and Disney World in Florida to temporarily close for Hurricane Ian in September.

When it comes to movies, Disney is looking forward to the box office. Marvel’s ‘Black Panther: Wakanda Forever’ and ‘Avatar: The Way of Water’ could be his two of the biggest blockbusters of the year, hitting theaters over the next two months.

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