The Walt Disney Co. reported that it has more than 205 million streaming subscribers, adding 9.2 million subscribers in the quarter.
CEO Bob Chapek said that the company added 7.9 million Disney Plus subscribers in its fiscal second quarter and remains on track to reach 230 million to 260 million Disney Plus subscribers by fiscal 2024.
Net income fell to $470 million, or 26 cents a share, from $901 million, or 49 cents a share a year ago.
Revenues rose 23% to $19.2 billion. The company said it gave up $1 billion in revenue when its deal with Netflix for Marvel content ended early.
Disney’s operating loss for its direct-to-consumer business increased to $900 million from $300 million a year ago. Direct to consumer revenue rose 23% to $4.9 billion.
Disney said the increased operating loss was closed by higher losses at Disney Plus because of higher production, marketing and technology costs. ESPN Plus also had a larger loss and Hulu had lower operating income.
Disney CFO Christine McCarthy said spending on programming and production for the streaming business would be up $900 million in the third quarter, compared to a year ago. But she added that for the full year, spending would be about $32 billion, compared to $33 billion previously forecast.
“Note that we are still expecting a strong content slate in the back half of the year,” McCarthy said. In addition to still expecting to reach its subscriber goals, Disney continues to expect Disney Plus to achieve profitability in fiscal 2024.
Investor concern about the growth and profitability of the streaming business had hurt Disney and other media companies. Disney stock closed at $181.67 on May 11, 2021. It hit a 52-week low of $104.79 on Wednesday and closed at $105.21. The stock continued to fall in after-hours trading.
Disney Plus had 137.7 million subscribers, up from 94.9 million a year ago and 118.1 million last quarter. In the U.S. and Canada, Disney Plus had 44.4 million subscribers, up from 42.9 million last quarter and 37.3 million a year ago.
On Disney’s earnings call with analysts, Chapek said more content was being added to Disney Plus.
“In recognition of Disney Plus's unique ability to attract viewers from a range of demographic groups, we are selectively enhancing Disney Pus with general entertainment titles designed to drive sign-ups amongst specific audiences, and deepen engagement amongst those cohorts," he said. “A benefit of our incredible creative engines and decades of general entertainment excellence is that we can reach these demographics, not only through the creation of original titles, but also by shifting resources from across our content ecosystem,” he said.
ESPN Plus had 22.3 million subscribers, up from 21.3 million last quarter and 13.8 million a year ago.
Hulu had 45.6 million subscribers, up from 45.3 million last quarter and 41.6 million a year ago.
SVOD-only Hulu subscribers rose to 41.4 million subscribers from 40.9 million last quarter and 37.8 million a year ago. Subscribers to Hulu Plus Live TV was reported at 4.1 million, down from 4.3 million last quarter and up from 3.8 million a year ago.
McCarthy said the second-quarter subscriber numbers "came in better than expected.” Disney had been expecting strong subscriber growth in the second half of the year. With the first half performance, “that delta we had initially anticipated may not be as large, but we still do expect an increase in the second half to exceed the first half.”
Operating income at Disney’s Media and Entertainment Distribution business was down 32% to $1.9 billion. Revenues were up 9% to $12.6 billion.
Disney’s linear networks saw operating income slip 1% to $2.8 billion with revenue increasing 5%.
Domestic channels’ operating income was up 4% to $2.3 billion, with revenue rising 8% to $5.8 billion. The increase in operating income was due to higher operating income at broadcasting, especially the ABC-owned television stations, partially offset by lower operating income at cable, the company said. ABC was up because of higher affiliate and advertising revenue. The move of the Academy Awards into the second quarter from third quarter last year contributed to the increase in ad revenue.
Costs at Disney’s cable networks were up, mostly because of getting four additional NFL games. Those cost were partially offset by increases in advertising and affiliate revenue, McCarthy said.
ESPN revenue increased by 30% in the quarter. So far this quarter, domestic ad sales at ESPN are packing up significantly, benefiting from a return to a pre-COVID NBA schedule, she said.
Cable subscribers were down 3%. The drop in cable subscribers, particularly at ESPN, was a big reason behind Disney’s pivot to streaming.
Content licensing was down 95%. The company is keeping more of its content to support its direct-to-consumer streaming businesses.
Disney’s Theme Park business had operating income of $1.8 billion, rebounding from a $406 million loss a year ago.
“Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services—with 7.9 million Disney Plus subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million—once again proved that we are in a league of our own,” said Bob Chapek in a statement
“As we look ahead to Disney’s second century, I am confident we will continue to transform entertainment by combining extraordinary storytelling with innovative technology to create an even larger, more connected, and magical Disney universe for families and fans around the world,” Chapek said. ■
