Disney Plus Hits Slowdown to Add Just 2,1 Million Subscribers, Misses Wall Street Expectations, if not a Million, or dreads Into Embrace
Disney Plus slammed on the brakes in the most recent quarter, gaining 2.1 million customers the streamers slowest growth since launching two years ago.
The company said that when it reported its fiscal Q4 2021 results, Disney Plus had 118.1 million paid subscribers worldwide, inching up from 116 million at the end of the prior quarter.
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The numbers were slightly short of Wall Street forecasts, which had pegged around 10 million net adds: Analysts on average expected Disney Plus subscribers to reach 126.2 million for the quarter, according to FactSet. In September, CEO Bob Chapek warned that the streamers growth would slow down from the prior quarter to increase by a net low single-digit millions of subscribers, citing in part COVID-related production delays.
Chapek announced Q4 results. "We continue to manage our direct-to-consumer business for the long-term, and we are confident that our high-quality entertainment and expansion into new markets globally will enable us to continue expanding our streaming platforms globally."
On the earnings call, CFO Christine McCarthy said the company expects net adds in the second half of fiscal year 2022 to be significantly higher than the first six months, with peak financial losses coming in FY2022, but not at the earliest half the service will release originals from all of its major brands Disney, Marvel, Star Wars, Pixar and NatGeo.
Across the company, revenue and earnings increased during the most recent quarter, boosted by the rise of visitors to Disneys resorts and theme parks a sign that tourism is slowly becoming reliant on COVID-19. Total Disney revenue climbed to $18.5 billion, up from $14.7 billion in the prior year. Earnings came in at $290 million or 37 cents per share, while loss of $580 million in year-ago quarter.
The results of Disney had failed Wall Streets forecast. Analysts had expected the company to report revenue of $18.8 billion and earnings per share of 49 cents. The result led to the tidal of the stock slipping in after-hours trading, with shares falling more than 4%.
The company said its results were negatively affected by capacity restrictions. The park revenue jumped 99% to $5.4 billion, but the operating income went down to 80% from the $945 million reported in the year-ago period. That drop was due to the increased programming costs and the reduction in a number of games and movies.
Compared to the same quarter, the average monthly revenue per paid subscriber for Disney Plus decreased from $4.52 in the September 2020 quarter to $4.99, due to higher mix of Disney+ subscribers from Hotstar, its lower-priced service available in India and other countries. About 37% of the total DisneyPlus subscribers came from Disney plus HotStar (down from just under 40% in prior quarter).
Overall, Disney reported 179 million total subscriptions across Disney Plus, ESPN Plus and Hulu, up from 174.9 million in the quarter.
Hulu subs grew by 1 million in the period to 43.8 million; that included a 300,000 sequential pickup of Live TV and SVOD customers, to 4.0 million. ESPN Plus subscribers climbed to 17.1 million, up 2.2 million from 14.9 million earlier.
The Mouse House is boosting Disney Plus subscriber rolls for the year-end 2021 calendar quarter with the weeklong Disney Plus Day celebration marking the two-year anniversary of the streamers debut. The marketing event includes a limited-time promotion offering Disney plus for $1.99 for first month to new and returning customers.
On Disney Plus Day itself (Nov. 12), the company plans to release a slew of content premieres, trailers and first-looks that include the Disney+ debut of the Marvel film Shang-Chi and the Legend of The Ten Rings on the streamer in Imaxs Expanded Aspect Ratio. Other new movies coming to Disney on Friday include Jungle Cruise, starring Dwayne Johnson and Emily Blunt, and original movie reboot Home Sweet Home
The company said that the increase in operating loss was partly offset by a better performance at Hulu, partly due to increased revenues at Disney Plus and at hulus.
On the call, McCarthy reiterated guidance that the company still expects Disney Plus to reach 230 million-260 million total paid subscribers by September 2024 (a dramatic increase from its 60 million 90 million pre-launch forecast) and that Disney will be profitable in fiscal 24.