Disney Misses Profits and Key Revenue Segments, Warns Streaming Growth Could Slow

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Bob Chapek, Disney CEO at the Boston College Chief Executives Club, November 15, 2021.

Charles Krupa | AP

Disney fell short of expectations for earnings and key revenue segments during Tuesday’s fiscal fourth quarter, warning that strong streaming growth for its Disney+ platform could decline in the future.

The company’s shares fell about 8% in after-hours trading.

The company’s quarterly results fell above and below Wall Street’s expectations as both the parks and media divisions underperformed estimates. And Chief Financial Officer Christine McCarthy tempered investor expectations for the new fiscal year, forecasting 2023 revenue growth of less than 10%. The company reported revenue growth of 22% in fiscal 2022.

Revenue in Disney’s media and entertainment division declined 3% year-over-year to $12.7 billion during the fiscal fourth quarter, as the company’s direct-to-consumer and theater businesses struggled. Analysts had expected revenue of $13.9 billion, according to StreetAccount estimates.

The company also recorded lower content sales as it had fewer theatrical films on its calendar and thus placed fewer films on the home entertainment market.

This is how the company performed in the period from July to September:

  • Profit per share: 30 cents per share adj. versus 55 cents expected, according to a Refinitiv survey of analysts
  • Revenue: $20.15 billion vs. $21.24 billion expected, according to Refinitiv
  • Disney+ total subscriptions: 164.2 million versus 160.45 million expected, according to StreetAccount

Disney+ added 12.1 million subscriptions during the period, bringing the platform’s total subscriber base to 164.2 million, more than the 160.45 million analysts had predicted, according to StreetAccount estimates.

However, growth is expected to slow in the first fiscal quarter, Disney executives warned on Tuesday’s conference call.

At the end of the fiscal fourth quarter, Hulu had 47.2 million subscribers and ESPN+ 24.3 million. Combined, Hulu, ESPN+ and Disney+ have more than 235 million streaming subscribers. Long the leader in the streaming space, Netflix had 223 million subscribers, according to the most recent tally.

Disney’s CEO Bob Chapek said in the company’s press release that Disney+ will be profitable in fiscal 2024. The direct-to-consumer division lost $1.47 billion during the most recent quarter. It also reported a 10% drop in its domestic average revenue per user (ARPU) to $6.10.

The company will increase prices for the service in December and plans an ad-supported tier, which is expected to boost revenue.

Chapek has been on a mission to better connect the company’s divisions as a single organization and accelerate its direct-to-consumer strategy.

The company reported record results in the parks, experiences and products segment, Chapek said. The division, which includes the company’s theme parks, resorts, cruise lines and merchandise business, saw revenues grow more than 34% during the quarter to $7.4 billion.

Still, Wall Street had slightly higher expectations for the division, with analysts expecting $7.5 billion in revenue, according to StreetAccount.

The division’s operating income increased more than 66% to $1.5 billion as spending in the national and international parks increased and consumers booked travel on the new cruise ship, the Disney Wish. In particular, the parks unit brought in $815 million in operating revenue, well below the $919 million expected by StreetAccount.

Disney cited higher costs and said these were only partially offset by higher ticket revenue, driven by the introduction of the Genie+ and Lightning Lane guest offerings.

CFO McCarthy said Tuesday that Disney is looking for “meaningful efficiencies” and is actively exploring the company’s cost base.

— Alex Sherman of CNBC contributed to this report.



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