As expected, The Walt Disney Co. reported slower growth for its direct-to-consumer streaming business.
The company said it had 179 million total direct-to-consumer subscribers at the end of its fiscal fourth quarter, up 5 million from the 174 million it had at the end of the third quarter. Disney Plus added just 2.1 million subscribers.
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Disney CEO Bob Chapek had warned that this quarter’s subscriber increase might be in the single digits, lower than analysts expected at the time.
On the company's earnings call Wednesday afternoon, Chapek said the streaming business remained on track.
"We remain focused on managing our DTC business for the long term, not quarter to quarter, and we‘re confident that we are in the right trajectory to achieve the guidance that we provided at last year's investor‘s day reaching between 230 and 260 million paid Disney Plus subscribers globally by the end of fiscal year 2024 and with Disney Plus achieving profitability that same year," Chapek said.
Chapek added that Disney will increasing its spending on content to compete in the streaming wars.
“We recognize that the single most effective way to grow our streaming platforms worldwide is with great content,“ he said. ”We are similarly focused on making new, high-quality entertainment, including local and regional content that we believe will resonate with audiences.
“We announced at our last investor day that we expect our total content expense to be between eight and nine billion in fiscal 2024 and we will now be increasing that investment further with the primary driver being more local and regional content,” Chapek said.
But chief financial officer Christine McCarthy wanted that Disney Plus would not be up to speed in getting content from Disney, Marvel, Pixar, Nat Geo and Star Wars until the second half of fiscal 2022. For that reason, Disney Plus will grow faster in the second half of the year.
She added that while Disney has previously forecast Disney Plus losses to peak in 2021, the company was now expecting losses to increase through 2022.
Disney Plus finished the quarter with 118.1 million subscribers, up from 116 million at the end of the third quarter and 73.7 million a year ago.
ESPN Plus finished the quarter with 17.1 million subscribers, up from 14.9 million last quarter and 10.3 million a year ago.
Hulu had 43.8 million subscribers, up from 42.8 million last quarter and 36.6 million a year ago. Hulu had 39.7 million SVOD-only subscribers. Up from 39.1 million last quarter and 4 million subscribers to its Live TV Plus SVOD service, up from 3.7 million in the third quarter, when subs dropped by 100,000.
Disney’s loss on its direct-to-consumer streaming business rose to $630 million from $374 million a year ago. Revenue increased 38% to $4.6 billion from $3.3 billion a year ago.
The company said the larger loss was due to bigger losses at Disney Plus because of higher programming, production, marketing and technology costs and, to a lesser extent, at ESPN Plus. Results improved at Hulu, where subscription and advertising revenue rose.
“This has been a very productive year for The Walt Disney Co., as we’ve made great strides in reopening our businesses while taking meaningful and innovative steps in Direct-to-Consumer and at our Parks, particularly with our popular new Disney Genie and Magic Key offerings,” Chapek said.
Operating income for the Disney Media and Entertainment Distribution unit fell 39% to $947 million from $1.551 billion a year ago. Revenue rose 9% to $13.1 billion.
Linear network operating income fell 11$ to $1.6 billion as revenue declined 4% to $6.7 billion.
At the domestic channels, revenue decreased 5% to $5.4 billion and operating income dropped 14% to $1.4 billion.
At the Disney parks, experiences and products unit, operating income bounced back to $640 million from a $945 million loss a year ago. Revenue doubled to $5.5 billion from $2.7 billion a year ago.
Disney’s had net income of $159 million, or 9 cents a share, compared to a loss of $710 million, or 39 cents a share a year ago.
Total company revenues rose 26% to $18.5 billion.
But chief financial officer Christine McCarthy wanted that Disney Plus would not be up to speed in getting content from Disney, Marvel, Pixar, NatGeo and Star Wars until the second half of fiscal 2022. For that reason, Disney Plus will grow faster in the second half of the year.
“As we celebrate the two-year anniversary of Disney Plus we’re extremely pleased with the success of our streaming business, with 179 million total subscriptions across our DTC portfolio at the end of fiscal 2021 and 60% subscriber growth year-over-year for Disney Plus,“ McCarthy said.
"We continue to manage our DTC business for the long-term, and are confident that our high-quality entertainment and expansion into additional markets worldwide will enable us to further grow our streaming platforms globally.”
